The post-U.S.-stock-market-open trend has given the market a clear answer. While this week’s inflation plus retail data weakened expectations for a September rate hike, it is still far from enough to turn the situation around.
Good news: U.S. stocks have not shifted into a defensive mode driven by recession or stagflation concerns. Bad news: the probability of a September rate hike is still stuck at 30%, which is not enough to boost risk assets.
After the U.S. stock market opened, the CME’s probability of a September rate hike once again returned to 30%. The dollar and the bond market stopped falling and rebounded. This clearly shows that the market’s confidence in the idea of no September rate hike is still insufficient.
The key factor is that energy prices are still at relatively high levels. If energy prices rise further and trigger an upward rebound in inflation—as reflected in the August inflation data—then the economic slowdown acceleration brought by tonight’s retail data could turn into stagflation. So, energy prices are the core factor.
Second, the July PCE from August 26, as well as the employment and inflation data for August in September, have not yet been released. The market still lacks confidence in Waller’s hawkish policy stance. To turn things around, we need to see whether future data further reinforces the current combination of slowing inflation, initial labor-market risks, and economic weakness.
After the retail data is released, this week’s macro main theme will be over. Going forward, the market will focus on how the U.S.-Iran situation and the trajectory of energy prices impact investors!
Note: The U.S.-Iran situation is not very optimistic right now, and in the second half of the U.S. stock trading session—especially near the close—there may very likely be temporary risk-off, safe-haven activity.#全球股市逼近历史高位
Good news: U.S. stocks have not shifted into a defensive mode driven by recession or stagflation concerns. Bad news: the probability of a September rate hike is still stuck at 30%, which is not enough to boost risk assets.
After the U.S. stock market opened, the CME’s probability of a September rate hike once again returned to 30%. The dollar and the bond market stopped falling and rebounded. This clearly shows that the market’s confidence in the idea of no September rate hike is still insufficient.
The key factor is that energy prices are still at relatively high levels. If energy prices rise further and trigger an upward rebound in inflation—as reflected in the August inflation data—then the economic slowdown acceleration brought by tonight’s retail data could turn into stagflation. So, energy prices are the core factor.
Second, the July PCE from August 26, as well as the employment and inflation data for August in September, have not yet been released. The market still lacks confidence in Waller’s hawkish policy stance. To turn things around, we need to see whether future data further reinforces the current combination of slowing inflation, initial labor-market risks, and economic weakness.
After the retail data is released, this week’s macro main theme will be over. Going forward, the market will focus on how the U.S.-Iran situation and the trajectory of energy prices impact investors!
Note: The U.S.-Iran situation is not very optimistic right now, and in the second half of the U.S. stock trading session—especially near the close—there may very likely be temporary risk-off, safe-haven activity.#全球股市逼近历史高位