Morning Markets: Yellen dovish on inflation
Watchlist
- Germany: Consumer Price Index (0600 GMT)
- Spain: Consumer Price Index (0700 GMT)
- Sweden: Consumer Price Index (0730 GMT)
- Ireland: Consumer Price Index (1000 GMT)
- US: PPI (1230 GMT)
- US: Initial Jobless Claims (1230 GMT)
Federal Reserve chair Janet Yellen's testimony to Congress, which continues and concludes today, saw the central bank come out with a more dovish slant on inflation. Analsts seized on a wording shift wherein Yellen said slowing inflation is only “partly the result of a few unusual reductions” in the CPI, concluding that the Fed is more cautious than markets may have thought regarding this metric.
Yellen's trepidation boosted Asian shares with Hong Kong equities up 0.98%, on track to their best week in a year, while the Kospi rose 1.13%. The Nikkei, however, was barely in the green with a 0.01% gain on the back of a downward move in financials.
US political turmoil continues to provide a volatile backdrop to market movements with president Trump out saying that his son is "innocent" of collusion with Russia after reports surfaced that Donald Trump, Jr. had met with a Russian lawyer promising information on Democratic candidate Hillary Clinton ahead of the 2016 vote.
Crude oil prices are treading water in the wake of the US Energy Information Administration announcing that inventories declined by 7.6 million barrels last week.
Bond yields in the US, Japan, and Australia moved lower with the 10-year US Treasury yield shedding 5.2 basis points in the wake of Yellen's testimony.
Today's data calendar sees Germany, Spain, Ireland, and Sweden releasing their latest CPI data while the US will also release weekly unemployment data at 1230 GMT.
Market signals
Asian session
- Gains on Wall St and commodity price strength gave sentiment a lift in Asia
- The Nikkei 225 lost its early gains; it was up by just 0.05% to 20,108.26 at 0523 GMT
- Hong Kong's Hang Seng surged again, extending its rally into a fourth day
- The Hang Seng was up 0.98% to 26,297.73 at the close
- Korea's Kospi Composite soared by 1.13%
- China's exports rose by 11.3% in June, while its imports rose by 17.2%
- The Shanghai Composite was up 0.44% to 3,211.76 at 0536 GMT
Australia's S&P/ASX200 bounced back from Wednesday's tumble
- The S&P/ASX200 closed up by a robust 1.11% at 5,736.80
- Iron ore prices retreated, but the price outlook is upbeat, given strong steel prices
- Crude market watchers will pay close attention to a planned Opec meeting next Monday
Forex ahead
- USD retreated against the yen; it was worth just ¥113.03 at 0655 GMT
AUD gained ground, thanks to the China data; it was worth 0.7710 at 0655 GMT
- Euro traders are preparing themselves for the ECB meeting next Thursday
From the Floor
Swedish inflation in focus. "I think SEK risk is generally to the upside, says Hardy
Risk-on. "I think Yellen's key message was that rates will not have to rise that much further," says Garnry
Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.
In opinion
1...2...3US unemployment data are expected to continue on their recent, robust trajectory when the figures are release at 1230 GMT, says James Picerno
Just holding ground on inflation will not be enough to convince the market to buy into the FOMC’s hawkish projected path for the Fed policy rate, says Max McKegg.
Iron ore has lost ground, but that was likely just consolidation, and strong steel prices and a solid report on financing in China should help it rebound, predicted the team at Saxo Capital Markets Australia.
Hong Kong's Hang Seng soared again today, with the rally driven by optimism about China's economy, and boosted by the post-Yellen surge on Wall Street. Photo: Shutterstock
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