U.S. Markets Edge Higher, Powell Testimony In Focus, Trade Talks Constructive

U.S. markets stage turn-around in early trading after Powell remarks pave the way to a rate cut this month.
Thomas Hughes

The U.S. Futures Are Higher In Early Trading

The U.S. futures are lower in higher trading as market participants wait on testimony from Jerome Powell. Powell is scheduled to testify in front of the House Financial Services Committee and the expectations he’ll hint at the Fed’s next move are high. Last month the FOMC raised hopes for a deep rate cut saying the committee stood ready to act as needed to sustain the economy. Those hopes were dashed last week when the NFP report was released, a report showing sustained strength within the U.S. labor market.

The morning’s action is supported by comments taken from a pre-released version of the Fed chief’s statements. In the release, he says uncertainty weighs on the outlook although the economy is performing reasonably well. The market was buoyed by the statements because the remarks open the door to a rate cut later this month. While it is likely Powell will give some clue to the Fed’s mentality it is unlikely he will provide much clarity. The Fed is a cautious institution and the NFP data does not support rate cuts of any kind.

The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite futures all erased early losses after the Powell release. The Dow moved up by roughly 35 points to indicate a mildly positive open for the underlying index. Earnings remain in focus, today’s news does not bring much of note, the peak 2nd quarter cycle begins next week.

European Indices Are Mixed Despite Powell Boost

European indices are mixed despite the boost from Jerome Powell’s statements. Investors in the region are cautious as the underlying reasons for cutting rates aren’t good. Trade tensions between the U.S. and its partners are the primary cause, geopolitical issues within the EU are a close second. The DAX is down about -0.45% at midday on Wednesday, the FTSE 100 is down only -0.05% while the CAC is up 0.05%.

Banks are the leading sector this morning, rebounding from lows set earlier in the week. Commerzbank is in the lead with an advance of 4.0%. Deutsche Bank is also up, advancing more than 2.0% and outpacing most others in the group. The banking sector is up collectively 0.70%.

In trade news, U.S. Economic Adviser Larry Kudlow says the U.S. and China held constructive talks over the phone. The talks did not result in a trade deal but such a deal may not be far off.

Asia Mixed, China CPI In Line With Consensus

Asian markets were mixed at the end of the session on Wednesday. The advancing indices all gained about 0.35%, the losers less than -0.50%. Advancing indices include the ASX, Kospi, and Hang Seng. Declining indices include the Nikkei and Shanghai, led by the Shanghai Composite. The Chinese markets were weighed down by tepid CPI. The CPI rose 2.7%, not a weak number, but only in line with expectations and no boost to morale.

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