Stocks Smashed Ahead of Powell – Nasdaq down 2%
US stocks took a pounding yesterday ahead of a key speech from the Fed Chair Jerome Powell today. After a strong day on Wednesday, the Nasdaq led the way down, dropping 1.9% followed by the S&P which lost 1.4% and the Dow which closed 1.1% in the red. The good news from Nvidia was superseded swiftly by concern about Fed interest rates and markets reacted accordingly. US treasury yields rebounded strongly after the unemployment claims data pointed to a resilient economy and the dollar jumped, finishing the day up 0.63%.
All eyes on Jackson Hole
We have been talking about it all week and at last, we are due to start hearing from the great and good of the central bank world later today. There is no doubt that the majority of the focus will be on the Federal Reserve Chairman and what he has to say about US interest rates, but we are also due to hear from ECB President Christine Lagarde. There is the distinct possibility that we could get the perfect interest rate differential storm with the Fed Chair pushing and hawkish agenda and the ECB being more dovish which would open the way for a stronger fall for the single currency. We are already sitting on levels not seen since mid-June and the above scenario could see the pair pushing back to parity over the next few months.
Some Data to Hit Markets Before Central Bankers
Global financial markets are fully focused on what we will hear from central bankers later today and over the weekend in Jackson Hole, however, there are still a couple of macroeconomic data releases to negotiate before we turn our attention to Wyoming. We have already seen a slight drop in the year-on-year Tokyo CPI number out of Japan this morning in the Asia session, but significantly more impactful, is the release of the German Ifo Business Climate data in the London session. This is followed up by the Revised University of Michigan Consumer Sentiment when the US Day starts, but as we have been saying all week, it really will be all about what we hear from Jackson Hole for the medium-term outlook.
