A look at the day ahead in European and global markets from Kevin Buckland
The Federal Reserve has the full attention of global markets, not least because the U.S. central bank’s highly anticipated Jackson Hole symposium kicks off later today.
Central bankers from around the world will attend, and investors are likely to hang on every word they utter. But chief among them all is Jerome Powell’s speech on Friday – his last one at the annual gathering as Fed chairman.
Like his predecessors, he’s likely to use the opportunity to guide how his tenure is recorded in the history books, particularly considering how harshly he’s been attacked by President Donald Trump for refraining from rate cuts this year.
What investors are waiting to hear though are any hints for a September cut, and they ramped up bets for easing on the back of a surprisingly soft payrolls report earlier this month.
The inflation picture remains hard to read though, with recent consumer price data showing little impact from Trump’s aggressive tariffs, but hotter-than-expected producer prices suggesting higher costs could seep into sticker prices in coming months.
Market-implied odds of a quarter-point cut on September 17 currently stand at 80%, down from 84% a day ago. That’s after Fed minutes from last month’s gathering suggested Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller were the only ones pushing for a rate cut at the meeting.
The other reason the Fed is so much in focus is Trump’s growing influence over the direction of monetary policy.
The U.S. President’s latest target is Fed Governor Lisa Cook, demanding her resignation over allegations made by one of his political allies about mortgages she holds in Michigan and Georgia.
If Trump were to oust Cook, that would add to his picks on the Fed’s board, with Council of Economic Advisers Chair Stephen Miran set to replace Adriana Kugler following her surprise resignation.
Bowman and Waller, of course, are both Trump appointees. And Trump could end up with four of the board’s seven members supporting his demands for lower rates.
Earlier this year, Trump’s threats to fire Powell before his term as governor ends in May of next year unsettled investors, driving big declines in the dollar.
The U.S. currency has taken the latest developments in stride, though. And Asian stocks were broadly mixed, generally adjusting to recent sharp rallies or selloffs. Japan’s Nikkei, for example, continued to retreat from a record peak reached earlier in the week, while South Korea’s KOSPI bounced back strongly from its tumble to a six-week low a day earlier.
Wall Street’s tech selloff was largely shaken off, with for example Japan’s heavyweight chip-testing equipment maker Advantest by far the biggest gainer by index points on the Nikkei.
Of course, other than sky-high valuations, Trump is being touted as a reason for the rout, with this administration looking into taking equity stakes in chip firms such as Intel, weeks after unprecedented revenue-sharing deals with Nvidia and AMD.
Retailers will get some attention as well today, with Walmart releasing earnings and providing a barometer on the health of the U.S. consumer. Target tumbled on Wednesday after the company named insider Michael Fiddelke as CEO and retained annual forecasts that were lowered in May.
Key developments that could influence markets on Thursday:
– Jackson Hole symposium opens
– U.S. weekly jobless claims, existing home sales for July, Philadelphia Fed’s business index
– Walmart results
– Flash PMIs for euro zone, France, Germany, Britain
(Reporting by Kevin Buckland; Editing by Muralikumar Anantharaman)
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