The Day at a Glance | August 16 2024

The top

• Markets will be watching the Jackson Hole symposium for possible signals of Federal Funds rate cuts.
• Federal Reserve Bank of Chicago President Austan Goolsbee on Friday said the U.S. economy is not showing signs of overheating, so central bank officials should be wary of keeping restrictive policy in place longer than necessary.
• Business surveys and weakness in Germany suggest that Eurozone growth may be weakening. With inflation still high, though, European Central Bank President Christine Lagarde faces a tough choice: keep rates elevated to tame rising prices or cut them quickly to avoid a possible recession.
• The political uncertainty left by Prime Minister Fumio Kishida’s decision to step down will likely lead to a pause to the Bank of Japan’s plan to raise interest rates steadily from near-zero levels.
• Oil prices fell by more than $2 on Friday and were on track for a weekly decline, with Brent slipping below $80 a barrel after a string of weak indicators for July from China overshadowed geopolitical risks.

 Economic environment

Markets will be watching the Jackson Hole symposium for possible signals of Federal Funds rate cuts. Next week, the annual Jackson Hole monetary policy symposium will take place, during which Federal Reserve Chair Jerome Powell is expected to deliver the keynote address. Markets will be closely monitoring Powell’s remarks for insights into the trajectory of the U.S. economy and the outlook for monetary policy. In his last press conference following the monetary policy announcement, Powell noted that if inflation and the labor market continue to cool, a reduction in the federal funds rate range could be on the table. Currently, the range stands at 5.25% to 5.50%, a level that has been maintained for over a year to slow the economy and bring down inflation. Markets are pricing a 25 basis point rate cut at the upcoming September 18 meeting.

Markets and Companies

U.S. stock indices opened with slight declines, but the market is poised to end the week positively. Yesterday, retail sales figures and jobless claims helped ease concerns about a potential recession in the U.S. economy. On the other hand, inflation data released earlier in the week reinforced expectations that the Federal Reserve may begin cutting interest rates in September. Asian and European stock markets are also expected to finish the week on a positive note.

In the debt market, the yield on the 10-year Treasury bond stands at 3.89%, while the 2-year bond is trading at 4.05%. The market is digesting the latest U.S. economic data.

In commodities, oil prices are down following a call between Qatar’s Prime Minister and Iran, during which Qatar reportedly urged Iran not to attack Israel while peace talks continue.

In Mexico, the IPC opened lower, trading at 54,241.8 points.

As for the exchange rate, the peso is trading at 18.62 against the dollar today, after closing at 18.65 yesterday.

Notes

Bayer shares rose after the company secured a legal victory against accusations that some of its products cause cancer. 

Applied Materials reported revenues and profits that exceeded consensus expectations.