Jerome Powell’s insight over US monetary policy yesterday served up a significant boost for Wall Street, with traders eyeing the short term benefits of a less hawkish approach being taken to monetary policy. However gains are already proving difficult to sustain – there’s a fighting chance that today’s PCE deflator could highlight inflationary pressures that sit at odds with yesterday’s message, whilst any hint that the US economy is running out of steam again comes with negative connotations for the wider equity market.
Chinese Manufacturing PMI data is due for release overnight and again this could prove unsettling for markets. This number could slide below the break-even 50 mark, signalling the real impact of those recently rolled out US trade tariffs. This adds to fears of a global economic slowdown and although dollar denominated assets could benefit from a flight to quality, again this would give nervous traders another reason to reach for the sell button. The G2 leaders’ meeting which gets underway tomorrow will also be closely followed as there’s significant scope for side conversations to be taking place here.
Ahead of the open we’re calling the DOW down 106 at 25260 and the S&P down 12 at 2732.
Yields are up, but it was a tale of two divergent tapes in US equity markets; Oil heads lower as dollar strengthens; Gold takes the express elevator down