Morning Minutes

Post-Powell Plunge Continues Into The New Trading Week




The market downturn which saw the Dow Jones Industrial Average plunge over 1,000 points and the NASDAQ lose 3.9% has continued this overnight and into this morning. Asia Pacific trading saw the Nikkei drop 2.6% in a catchup move, while in Europe this morning, the CAC is down 1.6%, the Dax is down 1.1% and the FTSE is closed for a UK bank holiday.

The battle between “Don’t fight The Tape” versus “Don’t fight The Fed” which had played out over recent weeks was clearly decided in favour of The Fed on Friday with Chair Powell clearly indicating the US central bank is going to continue tightening until inflation is subdued for the long term, that quitting too early has caused problems in the past and that the inflation battle could cause some pain, meaning that the Fed is unlikely to blink at the first sign of trouble and quashing speculation of a potential dovish pivot next year.

Powell’s sentiments on inflation were echoed by leaders from several European and Asia Pacific central bankers at a Jackson Hole panel discussion, including hints that larger interest rate increases could potentially be on the way from more central banks.

Trading action in currency markets is mixed this morning with the US Dollar up 0.8% against the Yen, 0.5% against the Pound, down 0.3% against the Euro and steady against the Canadian Dollar. Gold appears to be getting impacted by general softness in metal prices, down 0.7%, while platinum is down 1.1%. Dr. Copper is down 3.0% suggesting that investors remain concerned about the health of the global economy. Cryptocurrencies are also down today suggesting a more cautious environment, with Bitcoin down 0.75% and Ethereum down 2.25%. Energy commodities, on the other hand, are up so far today with WTI crude oil climbing 0.5% and natural gas rising 1.7%.

This week starts off quietly for business news with today’s main event being a speech from Fed Vice-Chair Brainard at 2:15 pm EDT. The corporate calendar remains quiet through the week, but the economic calendar ramps up as the week progresses. Wednesday brings US ADP payrolls, and Chinese PMI numbers, the turn of the month on Thursday brings Manufacturing PMI reports from around the world plus US construction spending and auto sales, Friday caps things off with the US nonfarm payrolls report.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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