Dow went up 30, decliners over advancers 5-4 & NAZ added 3. The MLP index was off 2+ to the 228s & the REIT index rose 2+ for a new record. Junk bond funds did little today & Treasuries also rose in price, bringing lower yields. Oil fell to the 54s & gold jumped up 15 to 1523 (staying close to its recent 6+ year record highs)..
AMJ (Alerian MLP Index tracking fund)
Stock fall as China announces retaliatory tariffs
Powell promises Fed will 'act as appropriate' to sustain economic expansion
St Louis Federal Reserve Pres James Bullard said today the central bank should continue to ease monetary policy because of the recession signal being flashed by the bond market. “The yield curve is inverted here. We’ve got one of the higher rates on the yield curve here. That’s not a good place to be,” Bullard said at Jackson Hole, Wyoming. The yield-curve inversion refers to the 10-year Treasury yield trading below its 2-year counterpart. This briefly happened this week & last week. Experts fear a yield-curve inversion because it has historically preceded a recession. These moves in the bond market come as economic growth across the globe is slowing down while China & the US remain engaged in a trade war. There is concern that slower global growth & the trade war could drag down the US economy. The Fed already cut rates in Jul by 25 basis points, citing “global developments” & “muted inflation.” Bullard said further cuts would help lift inflation in the US & mitigate the impact of a global economic slowdown. “The question is: Looking forward, how much risk are we facing from the fact that you’ve got a global manufacturing contraction going on and possibly more to come? So there is some downside risk, and I think you’d like to take out insurance against that downside risk, ” Bullard said. He added that the Fed could always “take back” an insurance rate cut. His comments come hours before a speech at the Fed symposium from Fed Chair Powell. Bullard is a voting member of the FOMC this year.
James Bullard says Fed should cut rates because inverted yield curve is ‘not a good place to be’
Stocks floundered after Powell failed to give a clear signal on an interest rate cut. Obviously, there is nothing for him to say, especially during a constantly changing financial environment. Trading should not be exciting today unless traders can get some sense about the Fed's next interest rate move. That seems doubtful. Demand for gold, negative bets on the stock market, continues to be strong.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 53.82 | -1.53 | -2.8% |
| GC=F | Gold | 1,516.30 | +7.80 | +0.5% |
Stocks traded down as China announced retaliatory tariffs on some US goods beginning as early as Sep 1. China
will raise import tariffs between 5-10% on $75B worth
of goods. The tariffs will be placed on more than 5K products. Shares of auto & auto parts makers along with major oil producers fell on the news. Investors are waiting to hear what Fed Chair Jerome Powell says in his speech today at the annual gathering in Jackson Hole. The
Fed has been a topic this week with the anticipation of Powell's
speech, plus the release of the minutes of the last central bank meeting
in which interest rates were cut by 0.25%. Stocks struggled yesterday after the yield curve invested again, its 3rd such move in the last 7 trading sessions, & a measure of manufacturing indicated contraction for the first time in a decade. The inverted curve has been a reliable indicator of a coming recession, which has spooked markets. Traders also appeared concerned about the not-exactly-dovish comments
by Kansas City Fed Pres, Esther George, who said that the US economy is “doing well,” though she's not “blind” to the risk around it. In Europe, London's FTSE inched higher, Frankfurt's Dax fell 0.4% & France's CAC slipped 0.3%. Asian
markets finished the day with gains. Tokyo's Nikkei climbed 0.4% , China's Shanghai Composite rose 0.5% & Hong Kong's
Hang Seng climbed 0.5%.
Stock fall as China announces retaliatory tariffs
China slapped new tariffs on $75B of US goods. This is the latest in the ongoing trade war as the US prepares to place tariffs on another $300B of Chinese goods in Sep. This
"reinforces America's perception of China as a bad actor" said Trump's
trade advisor Peter Navarro immediately after the tariffs were announced. Stock
futures reversed course on the news. Earlier, Hu Xijin, editor in chief at the Chinese state-run Global
Times tweeted: “China has ammunition to fight back. The US side will
feel the pain.” Hu’s comments come one day after Ministry of Commerce spokesman Gao Reng warned new tariffs on Chinese goods would “lead to an escalation of economic and trade
friction,” adding that the 2 sides are scheduled to resume talks in
about 2 weeks. The warnings come after Pres Trump on Aug 1 said the US, beginning next month, would place a 10% tariff on $300B worth of Chinese goods, adding they could go "well beyond 25 percent" if necessary. Beijing responded by letting its currency, the yuan weaken below 7 per $
for the first time in over a decade. The Trump administration then
delayed the tariffs on about 60% of those goods until Dec 15. An escalation in the trade war could cause more
problems for the stock market, which earlier this month found itself
under pressure as tensions ratcheted back up. Additionally, last week, the yield
curve inverted for the first time in over a decade. Such an event that
has preceded every US recession of the past 50 years. But
it's not just the US economy that is feeling the pain of the trade
war. China's GDP slowed to 6.2% in Q2, its
weakest growth since 1992, & its industrial output hit a 17-year low
in Jul. The
US has imposed 25% tariffs on $250B of Chinese
goods, causing Beijing to retaliate with its duties on $110B of
US products.
CHINA FIRES BACK: SLAPS TARIFFS ON $75B OF US GOODS
Chairman Powell offered little new insight into the US central bank's plan for
interest rates during the Jackson Hole Economic Symposium in Wyoming, promising to "act as appropriate" to sustain the record economic
expansion. "Because the most important effects
of monetary policy are felt with uncertain lags of a year or more, the
Committee must attempt to look through what may be passing developments
and focus on things that seem likely to affect the outlook over time or
that pose a material risk of doing so," Powell said. Traders
are pricing in a 100% chance of a rate cut during the Fed's
Sep 17-18 meeting. The
central banking conference comes in the wake of a flutter of worrisome
economic activity worldwide, including the inversion of the spread
between the yields of 2-year & 10-year Treasury bonds. While the curve
has since steepened, Pres Trump has continued to pressure the central bank, & Powell, to make a deeper interest rate cut. Yet
experts caution while there's no doubt global growth is sluggish —
Germany's economy is shrinking, & China's industrial output recently
fell to a 17-year low — economic data in the US remain, for the most
part, healthy. Although manufacturing activity is slowing, job growth is
robust; unemployment is low & consumer confidence is still pretty
high.
St Louis Federal Reserve Pres James Bullard said today the central bank should continue to ease monetary policy because of the recession signal being flashed by the bond market. “The yield curve is inverted here. We’ve got one of the higher rates on the yield curve here. That’s not a good place to be,” Bullard said at Jackson Hole, Wyoming. The yield-curve inversion refers to the 10-year Treasury yield trading below its 2-year counterpart. This briefly happened this week & last week. Experts fear a yield-curve inversion because it has historically preceded a recession. These moves in the bond market come as economic growth across the globe is slowing down while China & the US remain engaged in a trade war. There is concern that slower global growth & the trade war could drag down the US economy. The Fed already cut rates in Jul by 25 basis points, citing “global developments” & “muted inflation.” Bullard said further cuts would help lift inflation in the US & mitigate the impact of a global economic slowdown. “The question is: Looking forward, how much risk are we facing from the fact that you’ve got a global manufacturing contraction going on and possibly more to come? So there is some downside risk, and I think you’d like to take out insurance against that downside risk, ” Bullard said. He added that the Fed could always “take back” an insurance rate cut. His comments come hours before a speech at the Fed symposium from Fed Chair Powell. Bullard is a voting member of the FOMC this year.
James Bullard says Fed should cut rates because inverted yield curve is ‘not a good place to be’
Stocks floundered after Powell failed to give a clear signal on an interest rate cut. Obviously, there is nothing for him to say, especially during a constantly changing financial environment. Trading should not be exciting today unless traders can get some sense about the Fed's next interest rate move. That seems doubtful. Demand for gold, negative bets on the stock market, continues to be strong.
Dow Jones Industrials
No comments:
Post a Comment