Market movers today

Today, markets will continue to focus on the Jackson Hole conference in the US and especially Powell's speech at 16:00. The FOMC minutes from Wednesday showed a highly divided Fed on the question of rate cuts.

Remember this was before the even weaker global macro data, inversion of the yield curve (albeit only briefly) and even lower inflation expectations. Hence, we look for any statements on the latest developments and/or discrepancies among the FOMC board. ECB GC members Lane and Coeuré are also participating in the conference.

 

Selected market news

We have seen some modest gains in the Asian equity markets while the global financial markets are awaiting the speech by Fed Chairman Powell this afternoon. Comments from various Fed officials are pointing in different directions, as some members do not need see the need for another rate cut, while others see scope for a rate cut in September.

In Italy, the president is giving the parties until Tuesday to find a new government. Not surprisingly, League leader and interior minister Salvini is looking for a snap election, while the 5SM party is exploring the possibility of a coalition with the PD's Renzi. So far, the market is looking for a positive outcome as spreads are tightening.

The Japanese inflation data released this morning did not give much support for the Bank of Japan as CPI for July came in at 0.5% y/y versus 0.6% in June, while CPI excluding fresh food was 0.6% y/y, unchanged from June. Hence, inflation remains low and this will support expectations that the BoJ will ramp up monetary policy stimulus in September.

Last night, we published an update on the global economy ( Global Economic Update: Stuck in the mud but no hard landing yet) . The global macroeconomic backdrop has weakened significantly since we published our last Big Picture in June, following the escalation of the trade war between China and the US, where we now don't expect a resolution on this side of the US presidential elections. We see further downside for the global economy in the coming months, followed by a stabilisation and modest rebound on the back of monetary and fiscal stimulus and we have downgraded our growth trajectory for both advanced and several emerging markets with the risk of a more pronounced slowdown having increased, but there is also positive risk, including a sudden resolution of the trade war.

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