Nothing new in the FOMC minutes – “significant upside risks to inflation which might require further tightening” pushed recent dip buyers to the sidelines, allowing yields to drift higher into the day’s end. – Today, implied Fed funds futures continue to show the federal funds rate steady at 88% its next meeting in September.
Wall Street finished at the lows of the session thanks to added pressures from concerns over weakening growth in China. Asian stocks declined on concerns over a sustained period of elevated interest rates in the US and weaker than expected results at Tencent. Tencent missed estimates, it said, due to weakened consumer confidence and gaming sales that fell short of projections. In Japan, exports declined in July for the first time since February 2021, dragged down by waning demand in China for computer chips and automobiles. China’s real estate slump remains in focus as markets weigh the impact of the fallout. One of China’s biggest shadow banks is reportedly planning to restructure its debt and Evergrande Group said the securities regulator has built a case against it. China’s central bank has been trying to prop up the system with cash injections, but so far official action has failed to restore confidence.
- FX – USDIndex found legs on the hawkish lean from the FOMC minutes. The USDIndex closed at 103.31, while today’s highs are at 103.47. EURUSD drifted to 1.0860, Cable jumped to 1.2738 from 1.2685. USDJPY has climbed to a high of 146.56, as some of the haven demand for the Yen fades. Bloomberg noted the 145.90 mark was the catalyst for intervention last September.
- Stocks – The US100 lost -1.15% with the US500 down -0.76% while the US30 was off -0.52%. There was a drop in Intel after it agreed with Tower Semiconductor to abandon merger plans after Chinese regulators failed to rule on the action before the agreed to deadline.
- Commodities – USOil dropped to $78.63.
- Gold – held below $1,900, at $1,889.
Today: Walmart earnings and US unemployment claims and Philly index.
Biggest FX Mover: GBPAUD (+0.45%) spiked to 1.9970, while in August the asset appreciated by more than 4.6%.
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Andria Pichidi
Market Analyst
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