Tag: Federal Reserve

Uncertainty Into Stagflation Spooks Markets, Lifts Gold (Again)…

Today, Gold hit another all-time high as warnings from Federal Reserve Chief Jerome Powell about the impact of the trade war fueled volatility on Wall Street, leading to sharp declines in stocks and the dollar.

Jerome Powell spoke at the Economic Club of Chicago on Wednesday and said that policymakers would balance their dual responsibilities of fostering maximum employment and stable prices, “keeping in mind that, without price stability, we cannot achieve the long periods of strong labor-market conditions that benefit all Americans.

Powell repeated that the level of the tariff increases announced so far is significantly larger than anticipated. He added that the duties are highly likely to generate at least a temporary rise in inflation, but that the inflationary effects could also be more persistent.

In effect he parked the FED Put which the markets have been gambling on, positioning price stability as a “prerequisite” to sustainably achieving the Fed’s employment mandate and so pushed back on market pricing of a prompt monetary policy response to signs of a deteriorating growth outlook.

In Australia, the latest data showed employment increased by 32,200 in March, following a drop of 52,800 the previous month. The unemployment rate held at 4.1 per cent. The robust data prompted money markets to dial back expectations of a jumbo half a percentage point rate cut in May.

Elsewhere The Bank of Canada on Wednesday announced its policy rate would remain at 2.75 per cent. Tiff Macklem, the BoC governor, said the bank held off on a rate cut due to a lack of clarity concerning trade with the US.

And In passing, we note the ECB rate decision upcoming today, We expect a 25bp rate cut by the ECB today. Consensus is unanimous, and markets are fully pricing in the move, so the impact on the euro may prove limited. But I don’t expect much in terms of guidance by the ECB, which could echo Wednesday’s Bank of Canada communication: openly acknowledge policymakers are as confused as markets on the tariff impact, and they are not able to offer any forward-looking view at this stage.

I think the main message from Powell and other Central Bankers is patience, the tariff impacts will play out over months, not days, and thus markets will remain trigger happy on any piece of news, good or bad. I expect stagflation just around the corner!!

http://www.martinnorth.com/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Uncertainty Into Stagflation Spooks Markets, Lifts Gold (Again)…
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Uncertainty Into Stagflation Spooks Markets, Lifts Gold (Again)…

Today, Gold hit another all-time high as warnings from Federal Reserve Chief Jerome Powell about the impact of the trade war fueled volatility on Wall Street, leading to sharp declines in stocks and the dollar.

Jerome Powell spoke at the Economic Club of Chicago on Wednesday and said that policymakers would balance their dual responsibilities of fostering maximum employment and stable prices, “keeping in mind that, without price stability, we cannot achieve the long periods of strong labor-market conditions that benefit all Americans.

Powell repeated that the level of the tariff increases announced so far is significantly larger than anticipated. He added that the duties are highly likely to generate at least a temporary rise in inflation, but that the inflationary effects could also be more persistent.

In effect he parked the FED Put which the markets have been gambling on, positioning price stability as a “prerequisite” to sustainably achieving the Fed’s employment mandate and so pushed back on market pricing of a prompt monetary policy response to signs of a deteriorating growth outlook.

In Australia, the latest data showed employment increased by 32,200 in March, following a drop of 52,800 the previous month. The unemployment rate held at 4.1 per cent. The robust data prompted money markets to dial back expectations of a jumbo half a percentage point rate cut in May.

Elsewhere The Bank of Canada on Wednesday announced its policy rate would remain at 2.75 per cent. Tiff Macklem, the BoC governor, said the bank held off on a rate cut due to a lack of clarity concerning trade with the US.

And In passing, we note the ECB rate decision upcoming today, We expect a 25bp rate cut by the ECB today. Consensus is unanimous, and markets are fully pricing in the move, so the impact on the euro may prove limited. But I don’t expect much in terms of guidance by the ECB, which could echo Wednesday’s Bank of Canada communication: openly acknowledge policymakers are as confused as markets on the tariff impact, and they are not able to offer any forward-looking view at this stage.

I think the main message from Powell and other Central Bankers is patience, the tariff impacts will play out over months, not days, and thus markets will remain trigger happy on any piece of news, good or bad. I expect stagflation just around the corner!!

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

“Transitory” Inflation Is Back, Baby…

Overnight we got the latest decision from the US Federal Open Market Committee keeping its benchmark federal funds rate steady for the second straight meeting, in a target range of 4.25%-4.5%.

But in the subsequent press conference, where Fed Chair Jerome Powell seemed to be tip-toeing through a potential minefield, he said the committee had down forecast growth, increased inflation expectations, and said the full impact of tariffs had yet to work though. And while the FOMC did slow the pace of balance-sheet runoff — their updated forecasts and dot plot betrayed little concern about the growth scare that has gripped markets. More rate cuts are expected, perhaps two though the year, despite the higher inflation and lower growth.

Significantly though he dusted off the old “transitory” moniker again, which you will recall was used through the early phase of the strong inflationary pulse we saw post COVID. It was then dispatched to the dustbin of stupid and unhelpful terms, that is until it was resurrected in the press conference. Seeing as they got it so wrong last time, was it wise to do that, as I am not sure it will help their credibility this time around.

Incidentally, because the Fed will also start shrinking its balance sheet at a slower pace starting in April, meaning it will reduce the amount of bond holdings it lets roll off every month that is a quasi rate cut, without being a rate cut. Again, this is engineering a watch and wait period, for the FED, and perhaps the possibility of the real rate cut will be clearer by the Northern Summer.

So this was a do not harm press conference, but I suspect despite wanting to calm the markets, and avoid tripping over Trump, the truth is the data-dependent FED is itself unsure of future trajectory. Which may not bode well for the rest of us!

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
"Transitory" Inflation Is Back, Baby…
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“Transitory” Inflation Is Back, Baby…

Overnight we got the latest decision from the US Federal Open Market Committee keeping its benchmark federal funds rate steady for the second straight meeting, in a target range of 4.25%-4.5%.

But in the subsequent press conference, where Fed Chair Jerome Powell seemed to be tip-toeing through a potential minefield, he said the committee had down forecast growth, increased inflation expectations, and said the full impact of tariffs had yet to work though. And while the FOMC did slow the pace of balance-sheet runoff — their updated forecasts and dot plot betrayed little concern about the growth scare that has gripped markets. More rate cuts are expected, perhaps two though the year, despite the higher inflation and lower growth.

Significantly though he dusted off the old “transitory” moniker again, which you will recall was used through the early phase of the strong inflationary pulse we saw post COVID. It was then dispatched to the dustbin of stupid and unhelpful terms, that is until it was resurrected in the press conference. Seeing as they got it so wrong last time, was it wise to do that, as I am not sure it will help their credibility this time around.

Incidentally, because the Fed will also start shrinking its balance sheet at a slower pace starting in April, meaning it will reduce the amount of bond holdings it lets roll off every month that is a quasi rate cut, without being a rate cut. Again, this is engineering a watch and wait period, for the FED, and perhaps the possibility of the real rate cut will be clearer by the Northern Summer.

So this was a do not harm press conference, but I suspect despite wanting to calm the markets, and avoid tripping over Trump, the truth is the data-dependent FED is itself unsure of future trajectory. Which may not bode well for the rest of us!

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Dollar Taking No Prisoners As Fed’s Hawkish Cut Spooked Markets!

There was always going to be a question about the Fed’s December decision, would they react to the latest data, or position ahead of the Trump 2.0 policy set coming in 2025? Well, it looks like both were in the minds of the Monetary Policy committee, as Federal Reserve officials lowered their benchmark interest rate for a third consecutive time, but reined in the number of cuts they expect in 2025, signaling greater caution over how quickly they can continue reducing borrowing costs.

The Federal Open Market Committee voted 11-1 on Wednesday to cut the federal funds rate to a range of 4.25%-4.5%. Cleveland Fed President Beth Hammack voted against the action, preferring to hold rates steady.

Markets fell heavily in the US, and Asia, with the DOW and SP500 down more than 2.5% and the NASDAQ more than 3.5% lower. This was the largest post FED market move in 4 years. Falls were widespread. The ASX 200 slid 1.7%.

Bonds were stronger, . The US two-year note’s yield, more sensitive than longer maturities to Fed policy shifts, led the move in Treasuries, rising as much as eight basis points to 4.33%, the highest level since Nov. 25. and the US dollar rose, with the DXY up to 108.10.

The moves have reignited questions about how far central banks across Asia are willing to go to defend their currencies — and how much impact their moves will have. Indonesia’s central bank said on Thursday that it was intervening to push back against a selloff in the rupiah, while the People’s Bank of China used its daily reference rate to support the yuan.

Weaker currencies tend to raise the price of imports to a country, fueling domestic inflation. Further rate cuts could also put more pressure on currencies as investors look elsewhere for returns, exacerbating the impact of dollar strength.

Not good for chances of an RBA rate cut in 2025.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Dollar Taking No Prisoners As Fed’s Hawkish Cut Spooked Markets!
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Dollar Taking No Prisoners As Fed’s Hawkish Cut Spooked Markets!

There was always going to be a question about the Fed’s December decision, would they react to the latest data, or position ahead of the Trump 2.0 policy set coming in 2025? Well, it looks like both were in the minds of the Monetary Policy committee, as Federal Reserve officials lowered their benchmark interest rate for a third consecutive time, but reined in the number of cuts they expect in 2025, signaling greater caution over how quickly they can continue reducing borrowing costs.

The Federal Open Market Committee voted 11-1 on Wednesday to cut the federal funds rate to a range of 4.25%-4.5%. Cleveland Fed President Beth Hammack voted against the action, preferring to hold rates steady.

Markets fell heavily in the US, and Asia, with the DOW and SP500 down more than 2.5% and the NASDAQ more than 3.5% lower. This was the largest post FED market move in 4 years. Falls were widespread. The ASX 200 slid 1.7%.

Bonds were stronger, . The US two-year note’s yield, more sensitive than longer maturities to Fed policy shifts, led the move in Treasuries, rising as much as eight basis points to 4.33%, the highest level since Nov. 25. and the US dollar rose, with the DXY up to 108.10.

The moves have reignited questions about how far central banks across Asia are willing to go to defend their currencies — and how much impact their moves will have. Indonesia’s central bank said on Thursday that it was intervening to push back against a selloff in the rupiah, while the People’s Bank of China used its daily reference rate to support the yuan.

Weaker currencies tend to raise the price of imports to a country, fueling domestic inflation. Further rate cuts could also put more pressure on currencies as investors look elsewhere for returns, exacerbating the impact of dollar strength.

Not good for chances of an RBA rate cut in 2025.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Rate Cut Dance Begins; But You’re Not Invited!

To the surprise of no one the Federal Reserve cut its benchmark interest rate on Wednesday as signalled in my earlier post, and they went for the more aggressive half percentage point. The Federal Open Market Committee voted 11 to 1 to lower the federal funds rate to a range of 4.75% to 5%, after holding it for more than a year at its highest level in two decades. It was the Fed’s first rate cut in more than four years. Governor Michelle Bowman dissented in favor of a smaller, quarter-point cut — the first dissent by a governor since 2005 and the first dissent from any member of the FOMC since 2022.

The impact of the first cut from the FED echoed through global markets. But remember that the FED shift lower to 4.75% to 5% probably won’t impact the Bank of England’s latest rate decision, which will most likely be a hold, following last month’s cuts.

So far as Australia is concerned, the new FED rates are still significantly higher than the RBA’s weak 4.35%, and inflation in Australia is running much hotter as a result. The data flows in Australia also suggests no reason for the RBA to cut anytime soon, as for example the the unemployment rate was steady at 4.2 per cent in August, according to seasonally adjusted data released today by the Australian Bureau of Statistics.

And another data point from the ABS showed that Australia’s population grew by 2.3 per cent to 27.1 million people in March 2024. Our population at 31 March 2024 was 27.1 million people, having grown by 615,300 people over the previous year. Net overseas migration drove 83 per cent of this population growth, while births and deaths, known as natural increase, made up the other 17 per cent.

I don’t thing the FED’s move based on inflation at 2.2% there has much relevance in the short term in Australia. Were it not for the massive flood of migrants and the job creation programmes funded by state and federal government, we would probably be in a recession, and rate cuts would already be in play. But the brutal truth is Government policy is keeping rates higher for longer.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Rate Cut Dance Begins; But You’re Not Invited!

To the surprise of no one the Federal Reserve cut its benchmark interest rate on Wednesday as signalled in my earlier post, and they went for the more aggressive half percentage point. The Federal Open Market Committee voted 11 to 1 to lower the federal funds rate to a range of 4.75% to 5%, after holding it for more than a year at its highest level in two decades. It was the Fed’s first rate cut in more than four years. Governor Michelle Bowman dissented in favor of a smaller, quarter-point cut — the first dissent by a governor since 2005 and the first dissent from any member of the FOMC since 2022.

The impact of the first cut from the FED echoed through global markets. But remember that the FED shift lower to 4.75% to 5% probably won’t impact the Bank of England’s latest rate decision, which will most likely be a hold, following last month’s cuts.

So far as Australia is concerned, the new FED rates are still significantly higher than the RBA’s weak 4.35%, and inflation in Australia is running much hotter as a result. The data flows in Australia also suggests no reason for the RBA to cut anytime soon, as for example the the unemployment rate was steady at 4.2 per cent in August, according to seasonally adjusted data released today by the Australian Bureau of Statistics.

And another data point from the ABS showed that Australia’s population grew by 2.3 per cent to 27.1 million people in March 2024. Our population at 31 March 2024 was 27.1 million people, having grown by 615,300 people over the previous year. Net overseas migration drove 83 per cent of this population growth, while births and deaths, known as natural increase, made up the other 17 per cent.

I don’t thing the FED’s move based on inflation at 2.2% there has much relevance in the short term in Australia. Were it not for the massive flood of migrants and the job creation programmes funded by state and federal government, we would probably be in a recession, and rate cuts would already be in play. But the brutal truth is Government policy is keeping rates higher for longer.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Will The FED Stoke Inflation And Drive An Even Greater Wedge Between Rich And Poor?

This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia, whilst covering commodities and crypto on the way. I do this to keep track of what is going on in today’s complex markets, so expect lots of data not superficial waffle. You have been warned. If that’s not for you, then look elsewhere for more cute cats!

We are, it seems, at the pointy end of the FED’s decision to cut rates when they meet next week as US shares rallied on renewed expectations that they could opt for a half percentage point cut. Futures have it as 50/50 for a half or quarter point cut, but everyone is now expecting the first of several ahead.

While the renewed hopes for a bigger cut were boosting large cap indexes on Friday the optimism seemed most evident in the Russell 2000 small cap index (RUT), which rose 2.5% on the day and 4.4% for the week. Smaller companies are more sensitive to rate changes as they depend more on borrowed money and floating rate loans.

The Dow Jones Industrial Average rose 0.72%, to 41,393.78, the S&P 500 gained 0.54%, to 5,626.02 and is just 1% shy of its July record while the Nasdaq Composite gained 0.65%, to 17,681.55. The potential for a large rate cut helped drive utilities, materials and industrials higher. Twenty-four of the Dow’s 30 components were higher; Techs mostly lagged.

All three major U.S. benchmark indexes ended close to roughly two-week highs and logged solid weekly gains. For the week the S&P 500 rose 4.02% and the Nasdaq climbed 5.95%, with both marking their biggest weekly percentage gains since early November. The Dow added 2.60% for the week.

European stocks rounded off the week on a positive note, supported by technology, real estate and mining shares, while investors shifted their focus to the U.S. Federal Reserve ahead of a long-awaited monetary easing at its meeting next week. Technology and real estate gave the market its biggest boost, followed by miners that advanced 1.3%, as copper prices hit a two-week high on buying ahead of a Chinese holiday and amid stimulus hopes.

Australian shares extended gains on Friday, but stopped short of a closing high as a drag in banks offset a strong push in mining stocks as commodity prices rose. The benchmark S&P/ASX 200 ended up 0.3 per cent to 8099.9, bringing weekly gains to 1.1 per cent.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Will The FED Stoke Inflation And Drive An Even Greater Wedge Between Rich And Poor?
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Will The FED Stoke Inflation And Drive An Even Greater Wedge Between Rich And Poor?

This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia, whilst covering commodities and crypto on the way. I do this to keep track of what is going on in today’s complex markets, so expect lots of data not superficial waffle. You have been warned. If that’s not for you, then look elsewhere for more cute cats!

We are, it seems, at the pointy end of the FED’s decision to cut rates when they meet next week as US shares rallied on renewed expectations that they could opt for a half percentage point cut. Futures have it as 50/50 for a half or quarter point cut, but everyone is now expecting the first of several ahead.

While the renewed hopes for a bigger cut were boosting large cap indexes on Friday the optimism seemed most evident in the Russell 2000 small cap index (RUT), which rose 2.5% on the day and 4.4% for the week. Smaller companies are more sensitive to rate changes as they depend more on borrowed money and floating rate loans.

The Dow Jones Industrial Average rose 0.72%, to 41,393.78, the S&P 500 gained 0.54%, to 5,626.02 and is just 1% shy of its July record while the Nasdaq Composite gained 0.65%, to 17,681.55. The potential for a large rate cut helped drive utilities, materials and industrials higher. Twenty-four of the Dow’s 30 components were higher; Techs mostly lagged.

All three major U.S. benchmark indexes ended close to roughly two-week highs and logged solid weekly gains. For the week the S&P 500 rose 4.02% and the Nasdaq climbed 5.95%, with both marking their biggest weekly percentage gains since early November. The Dow added 2.60% for the week.

European stocks rounded off the week on a positive note, supported by technology, real estate and mining shares, while investors shifted their focus to the U.S. Federal Reserve ahead of a long-awaited monetary easing at its meeting next week. Technology and real estate gave the market its biggest boost, followed by miners that advanced 1.3%, as copper prices hit a two-week high on buying ahead of a Chinese holiday and amid stimulus hopes.

Australian shares extended gains on Friday, but stopped short of a closing high as a drag in banks offset a strong push in mining stocks as commodity prices rose. The benchmark S&P/ASX 200 ended up 0.3 per cent to 8099.9, bringing weekly gains to 1.1 per cent.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/