Markets Turn Cautious, FOMC Less Dovish Than Expected, Manufacturing Data Mixed

Global markets turn cautions after FOMC minutes, yield-curve inversion despite better than expected results from the retailers.
Thomas Hughes

The U.S. Futures Are Flat In Early Thursday Trading

The U.S. futures are flat in early Thursday trading after the FOMC minutes disappointed traders. The minutes were largely expected to confirm deeper rate cuts later this year and did just the opposite. The FOMC is concerned the market not view last month’s rate-cut as a shift in policy stance but as a mid-cycle adjustment. In the minutes, the cut is described as a recalibration effectively negating the “one hike too many” from last December. Traders hoping for deeper rate cuts had their hopes dashed again this morning when Fed President Esther George said the July cut as unnecessary.

The market did not take the minutes well. The general consensus is the FOMC is taking too long to act, that a recession is more likely than ever, and sent the yield-curve briefly into full-inversion. The curve has since re-flattened but yields remain near their long-term lows.

In stock news shares of Hormel and Dick’s were both moving higher in the pre-market session. Hormel reported better than expected revenue and earnings and provided favorable guidance, shares advanced 3.5% on the news. Dick’s reported much better than expected comp-store sales, 3.2% versus 0.9% expected, and raised full-year guidance. Shares of the stock shot up 10% on the news, aided by the CEO’s comments. The CEO of Dick’s says the company’s investments are working and headwinds are behind them.

European Markes Are Flat And Mixed At Midday

Markets in the EU are flat and mixed at midday following the release of the FOMC minutes. The minutes have reinvigorated fears of recession despite positive data and strong consumer spending in the U.S. The DAX is the only major index up in the early portion of the day, it has advanced 0.17%. The CAC is down about -0.20% while the FTSE is down about twice that.

Politics remains a focus in the EU. On the Brexit front, German Chancellor Angela Merkel says the UK should come up with an alternative to the Irish backstop, comments that highlight the contentious atmosphere surrounding the issue. In Italy, the main opposition party has announced it is ready to hold talks with M5S to form a new coalition government.

In stock news, NMC Health saw its shares surge another 30% after it restated guidance. The company is also a possible target for investment from two major hedge funds.

Asia Flat, Mixed As Japan’s Manufacturing Economy Contracts Again

Asian markets closed flat and mixed on Thursday as traders re-adjust to the new FOMC policy stance. the Hang Seng posted the largest loss at -0.84% while the Kospi was not far behind at -0.69%. The Australian ASX posted the largest advance at 0.24% followed by the Shanghai Composite’s 0.11% and the Nikkei’s 0.05%. Chipmakers were among the day’s biggest losers. In Japan, manufacturing PMI showed the manufacturing economy slowed for the fourth month.  This extends the manufacturing recession and ups the chances for BOJ policy intervention.

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