North American News
Stocks routed, closing on the lows in a brutal day
- Closing changes for the main US equity markets
- S&P 500 down 143 points or 3.4% to 4057
- Nasdaq down 3.9%
- DJIA down 3.0%
- Russell 2000 -3.4%
Powell won’t be getting too many back slaps from anyone at Jackson Hole tonight.
The old saying is that market’s don’t bottom on Friday’s either and that data bears it out.
US June core PCE 4.6% vs. 4.7% expected
- The details of the core PCE report for July 2022
- Prior was +4.8% y/y
- Core m/m +0.1% vs +0.3% expected
- PCE price index -0.1% vs +1.0% prior
- Price index y/y +4.6% vs +6.8% prior
Consumption:
- Personal income +0.2% vs +0.6% exp
- Real personal consumption +0.2% vs -0.4% prior
- Consumption adjusted +0.1% vs +0.4% expected
- Prior consumption +1.1%
University of Michigan sentiment index (final) for August 58.2 versus 55.1 preliminary
- Last month sentiment was at 51.5
- University of Michigan sentiment index 58.2 versus 55.1 preliminary
- The final report from July was 51.5
- Current conditions 58.6 versus 55.5 preliminary and 58.1 last month
- expectations 58.0 versus 54.9 preliminaary and 47.3 last month
- inflation one year 4.8% versus 5.0% preliminary and 5.2% last month
- inflation five year 2.9% versus 3.0% preliminary and 2.9% last month
Dallas Fed July trimmed mean PCE inflation +3.4% vs +6.9% prior
- Sharp reversal in the Dallas Fed measure
Commodities
Gold remains under pressure after Powell speech, unable to recover $1750
- Volatility soars after US data and following Powell’s speech.
- Fed Chair keeps hawkish tone, says high interest rates will persist for some time.
- Gold under pressure, after short-lived rebound above 1750$.
Gold is having a volatile session, still showing a negative bias after being unable to break key short-term resistance levels. It bottomed at the begging of Powell’s speech and then rebounded.
The yellow metal bottomed at $1741, the lowest in three days and then rebounded, to as high as $1755. Again, the price failed to break the critical area and then pulled back under $1750.
It remains in negative territory for the day and the odd of another test of the $1740 support remains in place, particularly while under $1750. If gold managed to break firmly above $1755, the intraday outlook could change. Above the next strong barrier is seen at $1770.
Critical for gold price action, US yields are moving without a clear direction. The 2-year yield jumped to 3.45% and then pulled back toward 3.40% while the 10-year hovered around 3.04%, below the level it had prior to Powell’s speech.
Fed Chair mentioned that higher interest rates will persist for some time and added the “historical record cautions strongly against prematurely loosening policy”. The tone of Powell was seen as “hawkish”.
The latest report on Friday showed a better than expected reading in the University of Michigan’s Consumer Sentiment Index for August which came in at 58.2 against the market consensus of 55.2.
Earlier on Friday, a report showed the Core Personal Consumption Expenditure Price Index dropped in July by 0.1% unexpectedly, the annual rate declined from 6.8% in June to 6.3% against expectations of 7.4%.
Silver tanks below $19.00 on Powell’s remarks, sour sentiment
- Silver price prepares to finish the week with losses of 0.64%.
- Fed’s Chair Powell reiterated the US central bank goal of bringing inflation down, even if it generates “pain to households and businesses.”
- Upbeat US economic data weighed on the white metal prices, plummeting more than $0.30.
Silver price tumbles from around weekly highs around $19.42, back below the $19.00 figure after Fed’s hawkish rhetoric finally takes its toll on the market’s erroneous perception of a Fed pivot. That, alongside positive US economic data, underpinned the greenback, a headwind for the white metal price. Therefore, XAG/USD is trading at $18.86 a troy ounce at the time of writing.
US equities are plunging after Jerome Powell’s saying that the Fed’s primary goal is bringing inflation to its 2% goal even if it spurs slow growth and “pain to households and businesses.” He added that “without price stability, the economy does not work for anyone.”
The US Dollar Index, a gauge of the buck’s performance against a basket of six currencies, gains more than 0.30%, set to finish the week above the 108.800 figure, while US Treasury bond yields are climbing, led by the short-end of the curve, with 2s up two and a half bps, at 3.398%. In the meantime, the US 10-year benchmark note sits at 3.039%, almost flat.
Fed’s favorite gauge of inflation edges lower, as well as American inflation expectations
In the meantime, the US Bureau of Economic Analysis reported that inflation in the US measured by the PCE slid to 6.3% YoY, less than estimates of 7.4%. Excluding volatile items like food and energy, the so-called Core PCE slowed to 4.6% YoY, lower than expectations of 4.7%.
Later, the University of Michigan’s Consumer Sentiment final release for August arrived at 58.2, upward revised from 55,1 preliminary reported, up from estimations of 55.2. Even though it’s a good reading, inflation expectations were the main spotlight. Americans expect inflation to top around 4,8% in the one-year horizon vs. 5% preliminary. Inflation is estimated to peak within five years at around 2.9% vs. 3% preliminary.
Baker Hughes US oil rig count +4
- US drilling rig count
- Oil rigs 605 vs 601 prior
- Gas rigs 158 vs 159 prior
EU News
European equity close: Another bruising day as DAX sinks to five-week low
- European stocks down around 2%
Closing changes for the main European bourses:
- Stoxx 600 -1.7%
- FTSE 100 -0.7%
- German DAX -2.3%
- French CAC -1.8%
- Italy MIB -2.3%
- Spain MIB -2.4%
Other News
Fed’s Powell: Restoring price stability requires using our tools forcefully
- Comments from the Federal Reserve Chairman
Comments from Jerome Powell at the 2022 Jackson Hole symposium.
- July lower inflation numbers are welcome but short of what’s needed by the Fed before confident in inflation moving down
- Fed is moving policy ‘purposefully’ to a level sufficiently restrictive to return inflation to 2%
- With inflation running far above 2 percent and the labor market extremely tight, estimates of longer-run neutral are not a place to stop or pause
- Restoring price stability will take some time, require using central bank’s tools ‘forcefully’
- Reducing inflation likely to require sustained period of below-trend growth
- There will very likely be some softening of labor condition and some pain to households
- There are unfortunate costs of reducing inflation but failing to restore price stability
- The historical record cautions strongly against prematurely loosening policy
- The longer high inflation continues, the greater the chance it will be come entrenched
- Estimates of longer-run neutral are not a place to stop or pause.
Cryptocurrency News
Federal Reserve takes aggressive stand on inflation, crypto hit by bloodbath
- Bitcoin, Ethereum, Cardano and other altcoins in the top 20 are hit by a bloodbath following Powell’s statements on inflation.
- The Federal Reserve Chair argues that restoring price stability through higher interest rates could increase pain for households and businesses.
- Analysts note that crypto buyers stepped in before Powell’s speech, however, there is a spike in uncertainty as Bitcoin, Ethereum prices decline.
In his speech at the Jackson Hole Economic Symposium, Jerome Powell announced that the Federal Reserve’s focus is to bring inflation back down to 2%. Price stability is key, and the burden of heavy inflation is likely to fall on households and businesses. In response to Powell’s speech, the crypto market was hit by a bloodbath.