US stocks closed at record highs again, as did the Nikkei 225 in Tokyo. European Shares this morning are a little firmer with the FTSE 100 up around a quarter of a percent to 8,172 in early trade. French stocks underperformed in early trade. Real yields came down a bit more to lift gold even as the dollar bounced. Oil prices skidded lower for a fourth day ahead of EIA inventories later today. Shares dropped yesterday, with the FTSE 100 giving up some early gains to finish down 0.7 per cent, a little bit less than the fall for Europe.
Market attention yesterday was on the Federal Reserve chair Jerome Powell’s testimony. He said the US economy was no longer overheated and cited the risk of moving too early and too late. “Elevated inflation is not the only risk we face,” he told lawmakers in Congress. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment." It was a cautious tone from Powell, but the dollar did firm up a bit as it caught some bid from a three-week low. Markets are pricing in a good chance of a cut in September and maybe one more by December. Powell continues today, followed by a 10-year Treasury auction.
Labour continued to kitchen sink the economic policy moves in the opening days of the new government – yesterday it was a £7.3bn national wealth fund designed to spur investment. Not to be cynical, but I've seen this kind of thing before and I am yet to see much evidence it works. And, dare I say, is that it? There is only so much you can do without spending – ie borrowing – a lot more. Pressure to spend more will come, though maybe not yet. Meanwhile, Dyson cut 1,000 UK jobs on the same day. Sterling retreated a bit yesterday after hitting its highest against the dollar in almost a month, but GBPUSD is just about holding onto 1.28.
China CPI and PPI inflation data were mixed. Consumer inflation slowed, whilst producer prices slowed at the slowest rate in 16 months. CPI rose 0.2 per cent vs 0.4 per cent expected, PPI fell 0.8 per cent. Japanese PPI rose to 2.9 per cent, though the month-on-month figure was a little below forecast at 0.2 per cent. The yen weakened, edging down towards last week’s four-decade low.
The Trader is written by Neil Wilson, chief market analyst at Finalto
