We had another steady day in the markets yesterday, equities continued their push to the topside helped by a strong earnings report from Morgan Stanley and the dollar drifted lower as risk fears pulled back. Fed Chair Jerome Powell spoke again and did nothing to lower expectations of another rate hike in September, he said that the US had not yet hit full employment and the Fed’s inflation forecast was “roughly balanced”. He also advised that they have no concern of an imminent recession as indicated by the flattening yield curve. Possible the key word in that last line is ‘imminent’ as a yield curve inversion traditionally front runs a recession by 9-12 months.
The main news focus of the day was once again on US President Trump and his recent meeting with Vladimir Putin as he continued to back track on previous statements and appears to contradict himself with each subsequent news conference or tweet. The markets have largely ignored the situation so far as it’s more political than economic, however as more confused messages continue to come from this administration and it’s leader, questions will start to be asked both domestically and internationally. If we start to hear rumblings with regard to the recent trade tensions and tariffs, then we may see further volatility and uncertainty hit the financial markets.
Looking ahead to today’s trading sessions and Asia’s focus will be on Australia as we have the latest job data due this morning. Expectations are for an increase of 16.5k job and for the unemployment rate to remain at 5.4%. Although this will have little influence on the RBA’s current thinking, we could see some strong moves in the Aussie which has been trading largely in line with risk sentiment if there is a big divergence from expectation. Later in the day the tier 1 data continues in the UK with the Retail Sales numbers due, with expectations set at a modest 0.1% rise. It’s a relatively quiet in the US session in terms of economic data releases and so the focus will once again be on the news wires for the next market moving catalyst.