Economy

Powell’s speech comes after the central bank’s readout of its July meeting minutes showed a “vast majority” of policymakers agreed the policy easing would likely begin next month.Four of the brokerages, J.P. Morgan, Citigroup, UBS Global Wealth Management and Wells Fargo, expect a 50 bps rate cut in the next Fed meeting in September.Nearly all brokerages expect the Fed to cut rates in all the three remaining meetings of the year, a view echoed by 55 of 101 economists polled by Reuters. Here are the latest forecasts from major brokerages ahead of Powell’s speech at the conference:Rate cut estimates (in bps) Sept Nov Dec Goldman Sachs 25 25 25 BofA Global Research 25 — 25 UBS Global Wealth 50 25 25 Management J.P.Morgan 50 50 25 Wells Fargo 50 50 25 Nomura 25 25 25 Deutsche Bank 25 25 25 Morgan Stanley 25 25 25 Citigroup 50 50 25 TD Securities 25 25 25 Peel Hunt 25 25 25 Wells Fargo 50 25 25 Investment Institute Barclays 25 25 25 UBS Global Research 25 25 25 * Wells Fargo Investment Institute is a wholly owned subsidiary of Wells Fargo Bank** UBS Global Research and UBS Global Wealth Management are distinct, independent divisions of UBS Group More

(Reuters) – Wall Street’s main indexes were set to open higher on Friday ahead of a speech from Federal Reserve Chair Jerome Powell that investors expect will offer hints on the pace of rate cuts in the world’s biggest economy.While minutes from the Fed’s July meeting this week showed a number of policymakers were ready to consider rate cuts come September, Powell’s speech could offer insights on the pace of easing and how the central bank will respond as the economy evolves.Powell is scheduled to speak at 10 a.m. ET (1400 GMT) at the annual global gathering of central bank officials at the Jackson Hole Economic Symposium in Wyoming.Traders have fully priced in a scenario where the Fed begins easing interest rates at its Sept. 17-18 meeting, with a 71.5% chance of a 25-basis-point cut over a 50 bps cut, according to CME Group’s (NASDAQ:CME) FedWatch tool. “The market has been predicting the first rate cut to start going back to March of this year and investors have been disappointed multiple times,” said Sam Stovall, chief investment strategist at CFRA Research in New York. “The only question is by how much and, unlike the sprinters in the Olympics, the Fed will not explode out of the blocks with a 50-basis-point cut.”Recent data including weekly jobless claims and payrolls revisions signaled the U.S. economy was slowing, albeit gradually, assuaging fears over a sharp downturn.That has helped Wall Street’s three main indexes recover from a plunge earlier this month triggered by a dour July employment report and yen carry trade. The S&P 500 is now about 1.8% away from a record high touched in mid-July, after falling as much as 9.7% from that level.At 08:15 a.m. ET, Dow E-minis were up 161 points, or 0.39%, while S&P 500 E-minis were up 0.53%. Nasdaq 100 E-minis were up 153.25 points, or 0.78%.Chip stocks such as Nvidia (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO) and Qualcomm (NASDAQ:QCOM) climbed more than 1% each in trading before the bell, rebounding from sharp losses in the previous session. The Philadelphia chip index notched its biggest daily drop in three weeks on Thursday.Rate-sensitive growth stocks such as Apple (NASDAQ:AAPL) climbed 0.7%, while Amazon.com (NASDAQ:AMZN) and Tesla (NASDAQ:TSLA) rose about 1% each, looking to bounce back from Thursday’s losses.Workday (NASDAQ:WDAY) shares jumped 15% after the human resource software provider beat market expectations for second-quarter revenue and announced a $1 billion stock buyback plan.Cruise will offer its autonomous vehicles on ride-hailing platform Uber (NYSE:UBER) starting next year, the companies said, as the General Motors-backed robotaxi firm attempts a comeback, sending shares of the automaker up 1.1%.Ross Stores (NASDAQ:ROST) gained 5.7% after the discount retailer raised its fiscal 2024 profit forecast.Later in the day, data from the U.S. Commerce Department’s Census Bureau is expected to show new home sales steadied in July after hitting a seven-month low in June. More

The firm said in a note that despite the Fed’s current stance, the U.S. labor market is softening and may soon fall short of full employment, increasing the likelihood of undershooting the Fed’s 2% inflation target.While the sticky shelter component has kept inflation above the target, AlpineMacro notes that U.S. inflation, excluding shelter, has already dropped below 2%.As shelter prices decelerate and labor market slack builds, the firm explains that overall core inflation could dip below the Fed’s target, further supporting the case for rate cuts.AlpineMacro emphasizes that if the Fed is slow to respond, it could increase the odds of a recession, ultimately driving rates even lower, potentially as low as 2%.However, they currently see a soft landing as the base case scenario, with the 10-year Treasury yield expected to settle around 3.5% in such a scenario.”The Fed needs to cut rates to around 3% to ensure a soft-landing,” they write. “Use a back-up in Treasury yields to 4% to increase duration.”Additionally, AlpineMacro suggests that as the Fed cuts rates, the U.S. dollar is likely to weaken, making the Japanese yen and the British pound particularly attractive.They also predict that the Bank of Canada will be the next G10 central bank to lower interest rates, advising investors to stay overweight in Canadian bonds.AlpineMacro’s analysis highlights the delicate balance the Fed must strike to navigate the current economic landscape without tipping the economy into recession. More

(Reuters) – The dollar slipped against the yen on Friday as traders geared up for Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole summit and weighed the prospects of the Bank of Japan continuing to raise interest rates.Central bankers will be key in setting the tone for financial markets over the coming days as a gathering of the world’s most influential monetary policymakers gets under way in Jackson Hole, Wyoming.Japan’s yen rose 0.2% to 146.03 per dollar, having firmed as much as 0.7% to 145.29 earlier in the session, after BOJ Governor Kazuo Ueda reaffirmed his resolve to raise rates if inflation stayed on course to sustainably hit the 2% target.”His (Ueda) comments suggest that market turbulence won’t deter the BOJ from considering more rate hikes in the future even if the next move isn’t imminent,” said Vasu Menon, managing director of investment strategy at OCBC.”As long as the move in the dollar-yen is orderly and gradual, this should not rattle global markets as much as it did earlier this month.”Speaking at parliament, where he was summoned to explain the BOJ’s decision to raise rates in July, Ueda however warned that markets remained jittery and may affect the central bank’s inflation forecasts.The rate hike from the BOJ sparked a massive unwind of carry trades funded by the yen, and that, coupled with worries of a U.S. recession, triggered a global selloff in early August. However, most markets have recovered since then. The dollar index, which measures the greenback versus six major peers, was a touch softer at 101.41 and remained close to the 2024 low of 100.92 it hit on Wednesday. The index is headed for fifth straight week of losses.EYES ON JACKSON HOLEPowell is due to speak at the Kansas City Fed’s annual Jackson Hole research conference at 10 a.m. EDT (1400 GMT) and traders will tune in to gauge by how much U.S. borrowing costs could go lower in the near term.Markets are now pricing in a 74% chance of the Fed cutting rates by 25 basis points (bps) at its September meeting, the CME FedWatch tool showed, with traders backing away from bets on a big 50 bps cut. Overall, they see 100 bps of cuts over the next three meetings, although some analysts think markets are being far too aggressive and could be disappointed if Powell is cautious. “I wouldn’t expect Powell to even allude to a 25 bps cut versus 50 in terms of what might come in September,” said Orla Garvey, senior fixed income portfolio manager at Federated Hermes (NYSE:FHI).”But if he’s perceived as being dovish, that is very supportive for the broader markets and could lead to more curve steepening in the U.S. because the data has been losing momentum for quite a while now and it hasn’t been acknowledged by the market and the Fed.”The euro was nearly flat at $1.1117, not far from the 13-month high it touched on Wednesday, while sterling rose 0.3% to $1.31295, a 13-month high. The currency was just shy of touching levels last seen in April 2022.Aiding the move was a survey that showed British consumer confidence held at an almost three-year high in August, adding to positive signals in the wider economy. More

LONDON/SYDNEY (Reuters) -World shares steadied on Friday, sitting just 1% shy of all-time highs, while the dollar languished around one-year lows ahead of a speech by the world’s most powerful central banker which markets will peruse for guidance on the shape of U.S. rate cuts. Europe’s broad Stoxx 600 index rose 0.35% after Asian shares outside Japan had nudged down 0.1%, but Japan’s Nikkei gained 0.4% as investors digested inflation data and remarks from Bank of Japan governor Kazuo Ueda flagging a willingness to raise interest rates if the economy and inflation turn out as forecast. That left MSCI’s all country world index up a whisker, and with early August’s turmoil in the rear view mirror, it is now trading around 1% off its mid July all time peak. It could get closer to that milestone later in the day with S&P500 futures up 0.55%. The main event of the week, certainly for bond and currency markets, is still to come however: Federal Reserve Chair Jerome Powell’s keynote speech to the Kansas City Fed’s annual Jackson Hole Research conference, which comes as U.S. economic data gives the Federal Reserve the green light to cut interest rates. Markets are fully priced for a 25 bp rate cut in September and see a cut at each of the Fed’s three remaining meetings this year, and for one to be a larger 50 bp move. The speech will be watched carefully to see whether it challenges or underscores such pricing. “The bond market is just focused on Jackson Hole and whether the extent of rate cuts it is pricing in is correct, the equity markets have a few other things to chew on,” said Manish Kabra, lead U.S. equities & multi-asset strategist at Societe Generale (OTC:SCGLY). He said Nasdaq earnings, the U.S. election and the tentative rotation out of large tech stocks were other things to consider. On the final night of the four-day Democratic National Convention, Vice President Kamala Harris promised to be a “realistic,” “practical” president for all Americans. For the bond market, expectations that rate cuts are coming have kept U.S. Treasury prices supported and not giving back their safe-haven gains from early August. The benchmark 10 year Treasury yield was down 2 basis points at 3.843% – it has only been above 4% for a very brief period in August, after spending almost all of 2024 there. Its German equivalent was steady at 2.24%. [GVD/EUR]The low U.S. yields have hurt the dollar, which has lost ground on almost all major peers in August. [FRX/] The euro was last at $1.1115, steady on the day and just off a 13 month peak hit earlier this week, and sterling was up 0.24% at $1.3125, battling to push through its July 2023 level, which would take it to its highest in well over two years. [GBP/] The Japanese yen strengthened, with the dollar down 0.2% at 145.85 after Bank of Japan governor Kazuo Ueda flagged an willingness to raise interest rates if the economy and inflation turn out as forecast. “The yen buying today is understandable given Governor Ueda showed very little sign of a shift in the views and plans of the BoJ following the financial market turmoil earlier this month,” said Derek Halpenny, head of research global markets EMEA at MUFG in a note to clients. Data out early in the day showed Japan’s core inflation accelerated for a third straight month, but a slowdown in demand-drive price gains suggest no urgency for any immediate rate hikes. Oil gained but was still set to end the week lower. Brent crude futures were up 1% at $77.98 a barrel, although they are down more than 2% for the week as swelling U.S. crude stocks and a weakening demand outlook in China have raised pessimism. [O/R]Gold prices are up 0.6% to $2,499.3 an ounce, recharging towards its record high of $2,531.6 hit just on Tuesday. More

PARIS (Reuters) – France’s left-wing parties told Emmanuel Macron on Friday that they want to form the next government, as the French President kicked off consultations on who could be prime minister nearly seven weeks after inconclusive parliamentary elections.Macron, who did not speak publicly after his meeting with the left, has so far ignored their demands, pointing out that despite coming first in the early July ballot, the left’s New Popular Front alliance was far from an absolute majority.”We told him that it was up to the political force that came out first (in the election) – the New Popular Front – to form a government,” Lucie Castets, a little known 37-year-old senior civil servant chosen by the left as its candidate for prime minister, said after their meeting with Macron.After weeks of vocal tensions between rival political camps, the left’s leaders sounded slightly more upbeat, and said Macron recognised there was a need for change – though what that would entail still remains to be seen.With Macron set to meet centrists and conservatives later on Friday, and the far right on Monday, the left’s leaders said they hoped for a quick answer after that.Whoever Macron names will face a tough job, with parliamentary approval of the 2025 budget one of many challenges at a time when France is under pressure from the European Commission and bond markets to reduce its deficit.Who will become prime minister – and whether they can get a hung parliament to back any reforms – is still very much an open question, with no sign yet of any broader coalition that would have a stable majority.Macron’s gamble to call the snap parliamentary election backfired, with his centrist coalition losing dozens of seats in a ballot that delivered a hung parliament.He has called for leaders to strike deals beyond party lines to form a government that would have a solid majority – and a source close to Macron said earlier this month he felt the balance of power was more with the centre or centre-right.Macron has a history of coming up with unexpected prime ministers. The French Constitution says he is free to name who he wants – however they need to be able to survive no confidence votes from the opposition.Some possible candidates include a conservative regional president, Xavier Bertrand and former Socialist Prime Minister Bernard Cazeveuve, sources have said. French media recently mentioned Karim Bouamrane, the Socialist mayor of an impoverished Paris suburb, as another possible name. More

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September futures on the S&P/TSX index were up 0.6% at 6:26 a.m. ET (10:26 GMT).The energy sector is expected to be in focus as oil prices edged higher, though poised to register a weekly loss. [O/R]The materials sector is likely to be impacted as gold prices inched up, while copper prices also gained. [GOL/] [MET/L] Investors will follow Powell’s commentary at the Jackson Hole Economic Symposium at 10:00 a.m. ET for clues on the U.S. interest-rate easing cycle, especially after recent dovish comments from policymakers backing reduction in borrowing costs. After seeing the U.S. policy rates at 5.25% to 5.50% for over a year, market participants widely expect a 25-basis points reduction at the Fed’s meeting next month.In Canada, retail sales numbers expected at 8:30 a.m. ET could bolster the possibility of a third consecutive rate cut by the Bank of Canada, following this week’s data that showed annual inflation at a 40-month low.Meanwhile, major Canadian banks are set to report their quarterly numbers next week.The S&P/TSX composite index ended lower on Thursday, after posting a record closing high in the previous session.In corporate news, the Teamsters union said workers at Canadian National Railway (TSX:CNR) will return to work after the government moved to end the lockout that threatened the economy. However, work stoppage at Canadian Pacific (NYSE:CP) Kansas City is expected to continue.COMMODITIES Gold: $2,497.42; +0.57% [GOL/]US crude: $73.68; +0.92% [O/R]Brent crude: $77.83; +0.79% [O/R]FOR CANADIAN MARKETS NEWS, CLICK ON CODES:TSX market report (TO)Canadian dollar and bonds report [CAD/] [CA/]Reuters global stocks poll for CanadaCanadian markets directory($1 = 1.3583 Canadian dollars) More