Kristian Rouz — Although the US Federal Reserve outlined the economic situation as promising, while abstaining from articulate timing vocabulary, investors are hotly debating the still possible September rise in borrowing costs.
Meanwhile, market participants and policymakers across the globe – from New York to Moscow – are keeping their eyes on the US Q2 GDP figures due today, as this particular parameter will be a decisive factor to the short-to-mid-term developments in US monetary policy, affecting both international trade in services, goods and capitals and the global financial markets. While the US stock futures are flat in the early hours of Thursday, the US dollar posted major gains, while safer haven US debt securities tumbled, with yields and market volatility rising.
In other sectors, the high-end hipster chain of soup kitchens Whole Foods Market also dropped on a weak sales outlook, with food stamps hardly bolstering the networking grocery’s commercial performance. On the bright sight were the clothing brand Skechers USA, the healthcare multinational Cigna, and, in the energy sector, ConocoPhillips, all three having surpassed previous earnings projections.
On the S&P 500, E-minis futures dropped 0.1%. Wall Street rallied on Wednesday after the US Fed policy meeting ended without an exact date of a rate hike announced, but with the regulator’s high opinion of the jobs and real estate markets. The Fed’s optimistic sentiment was taken by market participants as a hint to a more certain September hike, thus investors bought into the greenback before the rise in borrowing costs.
Futures bets on the Dow slid 0.1% as well.
The greenback rose against the euro to $1.0960, and to its one-week highest against the yen, at 124.16.
The dovish and cautious Fed has seemingly chosen a strategy of gradual normalization of their monetary policy, so that financial markets avoid losses due to a dearer credit, and so that the expansion in real economy does not become impaired in a more expensive liquidity environment.
US bond yields rose overnight on the Fed’s implicit message. Yield on two-year Treasury notes topped their one-month highest, while the benchmark 10-year securities were more stable, though value of the US debt decreased slightly.
