Dow Futures points to fresh record highs after historic Fed inflation shift; Asian stocks falter as Japan’s prime minister resigns

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Dow Futures points to fresh record highs after historic Fed inflation shift; Asian stocks falter as Japan’s prime minister resigns

The Market Minute of Friday

• Global equities mixed as investors reset price exposures to financial markets following the Fed’s historic inflation shift.
• Fed Chairman Jerome Powell says the central bank will allow inflation to run hot, at least temporarily, to enable full and wider employment in the world’s largest economy.
• Gold is rising, the dollar is falling and Treasury revenues are jumping after the policy shift, while equities continue to fresh record highs.
• Asian markets hit by the surprise resignation of Japanese Prime Minister Shinzo Abe, who will step down amid poor health after eight years.
• Oil prices increased as Hurricane Laura left much less damage than predicted, despite winds of 150 kilometers per hour and heavy rain.
• U.S. equity futures suggest a firmer open on Wall Street, including new highs for the three major benchmarks, ahead of July inflation data at 8:30 p.m. Eastern time.

Futures on Wall Street pushed to fresh record highs Friday, aroused by weakness in markets around the world as investors reset price expectations for everything from technology stocks to gold to the US dollar in the wake of the historic policy change Federal Reserve favoring employment over a losing battle against inflation.

Fed Chairman Jerome Powell laid the new focus on the Fed’s labor market, as his new tolerance for faster inflation as the world’s largest economy recovers from its coronavirus business, in an online speech for the annual Jackson Hole economic Kansas City Fed symposium yesterday.

“Our amended statement reflects our appreciation for the benefits of a strong labor market, especially for many in low- and middle-income communities, and that a robust labor market can be sustained without causing an involuntary increase in inflation,” Powell said. that he and his colleagues will allow inflation past an earlier benchmark of 2% to ensure an average rate of consumer prices over a longer period after subsequent years of underscoring that same goal.

The implications of the Fed’s new position are profound, as they are likely to cement the current Fed Funds rate close to 0% for many years, while also allowing for further balance sheet extensions that could fuel even more add to the financial market economy.

“The bottom line here is that Mr. Powell and his colleagues have given themselves significantly more room to maintain zero rates and a swollen balance over the next few years as the economy recovers from the Covid shock,” Ian said. Shepherdson of Pantheon. Macroeconomics. “After more than a decade of core inflation that is mostly below target, the Fed will remain accommodative to bring unemployment back, even if inflation exceeds target.”

The Fed’s historic shift on Thursday provided a solid boost to equities, and will continue to do so today, with futures contracts tied to the Dow Jones Industrial Average, suggesting another record high for the benchmark, which fell yesterday for the year in positive territory, with an opening clock gain of 160 points.

Contracts tied to the S&P 500, which hit an all-time high of 3,484.55 points after breaking 3,500 points for the first time earlier in the session, suggest a 15-point gain while linked to ‘ the Nasdaq, which has notched 36 record highs. so far this year, prices are up for a further 25-point bump.

Shares are not the only assets, however, affected by the newly discovered size of the Fed. The US dollar index, which follows the greenback against a rate of six global currencies, fell 0.7% in overnight trading to 92,287, returning to the 27-month lows that hit early August.

Benchmark 10-year Treasury bonds, which are more sensitive to inflation prospects, rose to a two-month high of 0.787% in overnight trading, before moving to 0.744%, while gold rose 1.2% to $ 1,952.56 per oun.

However, European equities failed to follow higher in Wall Street, with a gloomy reading of German consumer confidence and persistent flare-ups in coronavirus infections around the region’s growing sentiment, and a multi-year high of 1.1909 for the euro-focused export-holding equities.

The Stoxx 600 index was marked 0.32% lower in early Frankfurt trading, while Britain’s FTSE 100 in London was 0.05% lower when the pound hit an eight-month high of 1.3295 against the US dollars.

Asian stocks were hit by the shock shock of Japanese Prime Minister Shinzo Abe, who said he was stepping down amid poor health after eight years.

The announcement saw an overnight rally in the yen, which rose more than 1.2% to 105.33, and sharp sales in Japanese stocks, with the Nikkei 225 falling 1.4% to 22,882.65 points, as investors worried whether Abe’s successor would pursue similar inflation policies for the world’s third largest economy.

Elsewhere, global oil prices plummeted in the wake of Hurricane Laura, which hit the coasts of Texas and Louisiana early Thursday but left much less damage to the region than expected, given its 150-kilometer wind. hour and stormy storm surges.

WTI contracts for delivery in October, the new US benchmark, traded 9 cents lower from their close in New York on Thursday at $ 42.95 a barrel in early European trade, while Brent contracts for October, the global benchmark, were 10 cents cents lower seen at $ 44.99 per barrel.

This article was originally published by The street.

Video: Fed policy shift means rates will remain low for some time, says UBS strategist (CNBC)