Awaiting keynote speech by Janet Yellen

26/8/2016

US stocks slid on Thursday due to the weak performance of healthcare and consumer sectors. On the other hand, financials were on the rise as two more Fed members supported the case for the Fed rate hike in order to prevent overheating of the US economy. US dollar index, a measure of a greenback’s value against a basket of six major currencies, fell 0.2% on Thursday to $94.765. S&P 500 index fell 0.13% to 2,172.61. Healthcare sector fell 0.79%. Dow Jones industrial average rose 0.17% to 18,449.98 while Nasdaq lost 0.11% to 5,212.20. Today on Friday markets are focused on Janet Yellen’s speech in course of the central bankers meeting in Wyoming as the Fed President may give clues on the interest rate hike timing and support the case for the second rate hike this year. At the moment, policymakers anticipate two rate hikes till the end of this year and three hikes in 2017. However, financial markets are more conservative and expect only one rate hike till the end of 2017. There is still no clear evidence of what decision the policymakers will make in September as they are of mixed opinion while the economic data do not clarify the situation. Today at 14:30 CEST the advance goods trade balance for Q2, personal consumption for Q2, annualized GDP for July and core personal consumption expenditure will come out. Today at 16:00 CEST the Fed Chair Janet Yellen will speak at Jackson Hole Policy Symposium. At 19:00 CEST the Baker Hughes rig count will be released.

European stocks are looking down today on poor performance of pharmaceuticals and ahead of Yellen speech later on today. EURUSD added 0.15% to $1.1283 despite the weak German Ifo indices that were released yesterday and showed that business confidence worsened. STOXX EUROPE 600 fell 0.2% on Friday, UK’s FTSE 100 lost 0.1% and Germany’s Dax 30 index fell 0.3%. The pharmaceuticals were the bottom performers as they lost 6.7%. Mining sector benefited from the rise in copper and zinc prices and added 1.5%. Glencore, Rio Tinto and Antofagasta stocks advanced 1.0%-2.3%. By the way, zinc prices reached a 15-month high. Today in the morning the UK’s preliminary GDP for Q2 came out neutral at 2.2%. Several other data in UK’s economy were also mainly positive. No more significant data is expected to come out today in Europe.

Asian stocks were mixed on Friday. Chinese stock market indices were barely flat on Friday as falling property shares erased the gains of other sectors. CSI 300 index lost 0.1% to 3,307.09 while Shanghai Composite Index advanced 0.1% to 3,070.31. For a week the indices fell 1.7% and 1.2% respectively. Meanwhile, Hong Kong stocks were on the rise on Friday as Hang Seng index added 0.4% to 22,909.54 led by energy and tech stocks. On the other hand, Japanese Nikkei slumped to 3-week low on Friday following retreating Wall Street and ahead of Fed Chair speech later on this day. The Nikkei index lost 1.2% to close at 16,360.71. Topix index fell 1.3% to 1,287.90.

Oil futures prices rebounded as markets expected the US dollar to lose ground before the Fed Chair speech. Brent crude rose 1.2% to $49.64 a barrel while WTI oil also added 1.2% to $47.33.

Gold is steady on Friday having hit a 4-week low a day before. Spot gold rose 0.1% to $1,323 an ounce.