What matters in U.S. and global markets today |
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As investors wait anxiously for Federal Reserve Chair Jerome Powell's keynote speech at the symposium today, the to a mix of robust economic and price signals and from Powell's colleagues. The Fed futures market has reduced the chances of a rate cut next month to just 70% from almost a sure thing not that long ago. Two-year Treasury yields have also matched their highest level since August 1 as some Fed officials - including Cleveland Fed boss Beth Hammack, Atlanta's Raphael Bostic and Kansas City's Jeffrey Schmid – expressed doubts about the wisdom of a September cut, with inflation still well above target and showing renewed vigour in the U.S economy. U.S. stock futures steadied early Friday but only after this week's tech stock wobble resulted in in the S&P 500. The dollar notched its best level in about 10 days, with the yen at its weakest since August 1 on data. |
- Powell's Jackson Hole speech is typically a scene-setter for Fed policy over the year ahead and is expected to touch on changes to the average inflation targeting strategy as well as defending Fed independence - something in the spotlight again this week after administration demands for board member Lisa Cook to resign over alleged mortgage fraud. With minutes from the latest meeting and the latest Fed speeches showing no consensus on an urgent shift of stance, Powell is unlikely to signal a resumption of easing just yet - with no cast-iron case emerging from the latest sweep of economic data.
- Chinese stocks appear to be on a roll, with the Shanghai benchmark reclaiming 3,800 for the first time in a decade on domestic tech excitement. Tokyo's Nikkei was flat and the yen weaker on the inflation update there, but political paralysis in Japan is putting pressure on the bond market, with 10-year bond yields hitting the highest since 2008 and 30-year yields rising further to all-time peaks. With persistent calls for Prime Minister Shigeru Ishiba to step down after recent elections, things could come to a head next week when the ruling Liberal Democratic Party releases a report on reasons for the poor poll.
- Even as last weekend's excitement about a Ukraine peace deal has gone cold and Germany's second-quarter GDP was revised lower, European stocks were firmer on Friday - with some optimism about details of the U.S.-EU framework trade agreement released on Thursday and what it means for auto and pharma stocks. But Poland's WIG index posted its biggest decline in more than four months, falling 2.9% after the government proposed a hike to corporate income tax.
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It's Friday, so today I'll offer you some weekend reading suggestions away from the headlines. Morning Bid will be back on Tuesday, August 26, after the UK bank holiday. I'd love to hear from you, so please reach out to me at mike.dolan@thomsonreuters.com. |
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- Investors are bracing for volatility as Federal Reserve Chair Jerome Powell walks a fine line between curbing inflation and supporting the labor market, with thin August trading poised to
- Vladimir Putin is demanding that Ukraine give up all of the eastern Donbas region, renounce ambitions to join NATO, remain neutral and keep Western troops out of the country,
- The Trump administration is considering a plan to reallocate at least $2 billion from the CHIPS Act to fund critical minerals projects and boost Commerce Secretary Howard Lutnick's influence over the strategic sector,
- Is the U.S. economic outlook so weak that it warrants multiple interest rate cuts? Or are U.S. markets pulling in huge inflows from abroad because the country's outlook is so attractive?
- Lambasting credit rating agencies is a favorite pastime of many debt market participants. However, writes publisher Marty Fridson, self-interest appears to drive many of the most common criticisms, and
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Weekend reading suggestions |
Here are some articles away from the day-to-day headlines that you may find interesting. |
- GEOGRAPHY MATTERS: San Francisco Fed economists look into U.S. state level jobless claims to assess the health of the national labor market and conclude that as of mid-2025 employment conditions were pretty stable. Developing a new 'Labor Market Stress Indicator' from these state datasets and adjusting for the size of the states and their overall shares, the model shows why apparent labor market weakness in the summer of 2024 was a false signal on the overall economy and stability through the middle of this year indicates only a 5% chance of recession ahead.
- HUBBARD ON FED REFORM: Once tipped as a candidate for the Fed Chair, Glenn Hubbard - former Council of Economic Advisers chair under George W. Bush - writes that the next Fed leader "will have to confront fundamental questions about the institution's approach to policymaking". In a piece on Project Syndicate, Hubbard said Trump is wrong to impugn the motives of standing Fed Chair Jerome Powell but the Fed had made serious mistakes and needed an overhaul of its processes, forecasting, stance on regulation and structure.
- WHAT TRUMP SHOULD HAVE DONE: Sketching how they think President Donald Trump should be handling explosive U.S. trade deficits, economists Vijay Joshi and David Vines reckon weakening the dollar substantially - by more than 30% - should be central to any plan. However, in a piece on CEPR's VoxEU site, they reckon that to do this successfully over time will require much more fiscal consolidation and, ideally, some global agreement - a very different pact to the 'Mar a Lago Accord' proposed by some of Trump's team.
- GERMAN AGEING AND MIGRATION: OECD economists model how a shrinking working age population in Germany and its main trading partners cuts GDP noticeably until 2030 and German manufacturers experience a significant deterioration in their position on global markets. However, it also shows that if net migration inflows increase moderately compared to a 2010-2019 average, particularly workers with vocational education and training degrees, the negative effects of ageing on the competitiveness of the manufacturing sector can be reduced to a large extent.
- NUCLEAR-ARMED JAPAN?: A contingent of senior Japanese lawmakers are beginning to think the unthinkable in the only nation to have suffered an atomic bomb attack. Surrounded by nuclear-armed neighbours China, North Korea and Russia, a Reuters Special Report details how Japan too may have to deploy weapons of mass destruction given the serious doubts sown about the United States' commitment to defend its allies.
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Graphics are provided by Reuters. |
- Canada June retail sales (8:30 AM EDT)
- Federal Reserve Chair Jerome Powell speaks on "Economic Outlook and Framework Review" at 2025 Jackson Hole Economic Policy Symposium (9:00 AM EDT); Boston Fed President Susan Collins speaks
- U.S. corporate earnings: Workday
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