Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Tensions Ease As Central Bank Stimulus Expectations Grow

Published 08/16/2019, 04:57 AM
Updated 04/25/2018, 04:10 AM

Wall Street finished a volatile session broadly on positive ground overnight, with the S&P 500 and the Dow advancing whilst the NNASDAQ Composite nudged lower. Stronger than forecast US retail sales and better than expected earnings from the likes of Walmart (NYSE:WMT) helped calm frayed nerves in the market. Whilst investors remain jittery following the 2-10s yield curve inversion, a recession warning sign that is difficult to ignore, an easing of the treasury rally overnight is helping sentiment.

Asian markets were also firmer overnight after China hinted at economic support, in a plan to boost disposable income. The moves comes after weak Chinese data earlier in the week pointed to continued trouble in the world’s second largest economy and as central banks across the globe look set to offer aggressive stimulus.

Central Bank Support

China is not alone is looking to offer support to its economy. There are growing expectations that the Federal Reserve will look to cut interest rates again in the coming months, even though recent data points to still solid economic growth and higher inflation. Investors will be watching Fed Chair Jerome Powell like a hawk next week when he speaks on August 23rd at the annual central bankers retreat at Jackson Hole, Wyoming.

Euro remains at €1.11 US – German yield spread in focus

Overnight Mexico was the latest country to surprise with a rate cut whilst yesterday the ECB’S Rehn flagged the need for a significant easing package when the ECB meet in September. Talk of further easing by the ECB sent the euro back towards €1.11. With no high impacting eurozone data the focus for the pair is likely to remain on the widening US – German yield differential following yesterday’s better than expected US data.

Trade dispute update

US – Sino trade headlines have kept investors on edge across the week. Despite Trump pushing back some tariffs until December, China adopted a more defensive tone vowing to retaliate against Trump’s latest tariffs. However, the headlines moving towards the weekend have been more encouraging with Trump insisting that he would soon be having a phone conversation with China’s President Xi and that the dispute would be short lived. The growing political unrest in Hong Kong has the potential to complicate US – China relations further.

For now, US – Sino tensions have stepped back from the brink and whilst recession signals are proving hard to ignore, sentiment is showing cautious signs of improvement. Safe haven flows have eased with the yen ticking lower and gold edging off recent highs. Moves into riskier assets such as equities are on the rise.

Original Post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.