© Reuters. By Geoffrey Smith
Investing.com – Chances of a compromise on the next round of fiscal stimulus increase, but eyes are on the release of the Federal Reserve minutes for hints of more immediate support. The dollar continued to weaken. Inflation is ahead of expectations in Europe, at least for now. Shares are expected to build on the near-Tuesday high for the S&P 500 and oil will be scratched ahead of an OPEC + meeting. Here’s what you need to know about financial markets on Wednesday 19th August.
1. Pelosi, McConnell signals the willingness to compromise
The chances of a compromise on the latest round of economic relief measures appeared to increase after Second Chamber member Nancy Pelosi indicated she would drop many of her demands to deal with a short-term deal.
“We are ready to cut our bill in half to meet the needs right now,” Pelosi said of an event organized by a Politico, adding, “We will resume it in January.”
Bloomberg later quoted her spokeswoman as clarifying her remarks to mean that Democrats would have to meet halfway the shiny Republican proposal, instead of “cutting our bill in half.”
Bloomberg reported that First Republicans are now drafting a preliminary proposal, with some money for the U.S. Postal Service, additional benefits for unemployment and help for small businesses and for reopening of schools. However, House Speaker Mitch McConnell said the House would not support a bill to fund the USPS currently being drafted by House Democrats.
2. Minutes for Fed are scanned for signs of policy change
With fiscal policy still an effective deadline, the release of the minutes of the last Federal Reserve policy meeting at 2 PM ET (1800 GMT) is likely to get more attention that it would do otherwise.
Most short-term economic indicators have indicated that the rebound has flattened since the last meeting, something that will encourage market participants to press the minutes for each language on what would be sufficient to trigger further stimulus.
John Velis, FX strategist at BNY Mellon (NYSE :), said in a note to clients that any sign of a move to give up curve targeting could be interpreted as a signal that the Fed is preparing new actions. The release comes against a backdrop of mounting speculation that the Fed may shift its strategy to pursue a multiple inflation target over multiple years, effectively forcing it to run the economy longer faster than it emerges from the pandemic.
Such speculation awaited the dollar on Wednesday. By 6:30 AM ET (1030 GMT), the greenback tracked against a rate with developed market rates only 0.1% above the 28-month low it hit 92,237 on Tuesday.
Shares set to build on new S&P high
U.S. stock markets are set to open modestly higher, with the S&P 500 building on the new record high close to reaching it on Tuesday.
By 6:30 AM ET, the contract was up 41 points as 0.1%, and they were up in parallel.
The day begins with a representation update from and and discount fashion giant and ends with reports from – owner of Victoria’s Secret – and, more importantly, chipmaker.
4. Inflation is rising in Europe
Inflation peaked in July in the UK and the eurozone, but analysts dismissed the development as “sound” generated by the difficulties in collecting data in the current circumstances. The rate in the eurozone rose to 1.2% from 0.8%, thanks in large part to prices for clothing and services. The headline number would have been even higher without the temporary reduction of VAT in Germany, whose price basket accounts for 28% of the total.
In the United Kingdom, consumer prices rose 0.4% month-on-month, instead of the expected drop of 0.1%.
In both the eurozone and UK analysts say the July figures are in line with the longer-term trend, given the inflationary forces created by rising unemployment and higher economic uncertainty. Claus Vistesen of Pantheon Macroeconomics notes that bearing lower energy prices is losing ground, “but the truth is that we do not yet have a clear view of the underlying trend of core inflation in (the eurozone).”
5 Oil calm as OPEC + ministers review output deal
Oil ministers from most of the world’s largest producers will gather virtually to assess the state of the world market.
The Joint Ministerial Monitoring Committee convened by the so-called OPEC + block, which starts at 10 AM ET, is not expected to recommend significant changes to production policies, given the relatively high degree of compliance with previously agreed cuts in exports.
Elsewhere, the US Energy Information Administration will release its weekly review of crude oil inventories. The U.S. Petroleum Institute estimated on Tuesday that crude stocks fell by 4.29 million tons, significantly more than the expectation of 2.9 million barrels.
Despite that, futures have not yet advanced above the $ 43 per barrel level. At 6:30 a.m., they were 0.9% down at $ 42.69, while futures were down 1% at $ 45.01 per barrel.
