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Stocks lower after Fed minutes

Stocks lower after Fed minutes 150 150 Realm

Stocks are lower this morning in the UK and Europe after minutes from the Federal Reserve’s late July meeting revealed a cautious view of the US economy and indicated they were lowering their forecast for economic growth for the rest of the year.

 

Global Macro

  • Federal Reserve officials reiterated their pledge to maintain aggressive measures to support the economy, minutes from the July 28-29 meeting showed. The Fed policy is going to remain extremely accommodative given great uncertainty and some stalling in large parts of the recovery. Regarding the yield curve control, officials continued to voice scepticism about its usefulness. The Federal Reserve left the target range for its federal funds rate unchanged at 0-0.25% on July 29th 2020 to bolster business through the pandemic.
  • US crude oil stocks fell by 1.632 million barrels in the week ended August 14th, 2020, the fourth consecutive period of decrease and compared to market expectations of a 2.670 million drop, according to the EIA Petroleum Status Report. Meantime, gasoline inventories were down by 3.322 million barrels, while markets had forecast a smaller 1.057 million decline.
  • The US dollar strengthened in late trading on Wednesday and is on track to post the first gain in six sessions after FOMC minutes showed Fed officials were concerned that a recovery from the economic downturn triggered by the coronavirus pandemic faces a highly uncertain path. The DXY was around 93 and is on track to post the first gain in six sessions. Still, the dollar remains close to levels not seen since May of 2018 as investors worry about the US economic recovery, uncertainty over whether US lawmakers would strike an agreement on a new coronavirus relief package, and mounting US-China tensions.
  • Annual inflation rate in the Euro Area edged up to 0.4% in July of 2020 from 0.3% in June, reaching the highest in 4 months and matching preliminary estimates. The highest contributions came from cost of non energy industrial goods (prices up 1.6% vs 0.2% in June); services (0.9% vs 1.2%); food, alcohol & tobacco (2% vs 3.2%) and energy (-8.4% vs – 9.3%). On a monthly basis, consumer prices fell 0.4%, the biggest drop since January and above initial estimates of a 0.3% decline.
  • Mortgage applications in the United States fell by 3.3% in the week ended August 14th, following a 6.8% increase in the previous week as rates rose from record lows, data from the Mortgage Bankers Association showed. Applications to refinance a home loan went down 5.3% while homebuyer mortgage applications increased 0.8%. The average fixed 30- year mortgage rate advanced 7 bps to 3.13%.
  • On Wednesday: European stocks gained ground amid bets for further stimulus measures and on optimism on the vaccine front. A cautious undertone prevailed ahead of the FOMC’s last meeting minutes to be released later in the day, which may provide more clues about an anticipated shift in the monetary policy outlook. US stocks came under pressure in afternoon trading After seeing modest strength earlier in the session. The weakness that emerged on Wall Street came following the release of the minutes of the Federal Reserve’s latest monetary policy meeting. The minutes of the Fed’s July meeting noted that the coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. Asian stocks ended mixed as coronavirus worries persisted and investors kept a wary eye on the release later today of the minutes from the July FOMC meeting.

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