1) Stocks Rally on Fed Signals; Treasury Yields Dip
Stocks in Asia rose after Federal Reserve Chairman Jerome Powell signalled an openness to interest-rate cuts, giving a boost to risk appetite that remains fragile amid trade-war tensions. Treasury yields gave back some of Tuesday’s rise. Japan led the charge, with the Topix index up more than 2%, though gains elsewhere in the region were more modest. U.S. futures edged higher and European futures were little changed.
2) Fed Inches Toward Rate Cut as Trump’s Trade War Frays Patience
The Federal Reserve’s top policymakers aren’t yet ready to cut interest rates, but worsening trade tensions are nudging them in that direction. In separate comments Tuesday, Fed Chair Jerome Powell and his No. 2, Richard Clarida, reassured nervous investors they’re watching closely for signs that disputes between the U.S. and its trading partners are denting the outlook for the world’s largest economy.
3) Short-Seller Pain That Began Monday Just Switched to a Bloodbath
A drubbing for short sellers that went under the radar Monday snowballed as dovish indications from the Federal Reserve handed bearish traders their worst back-to-back losses in five months. It’s a change in luck for speculators who’ve been raking in profits from well-chosen bets against individual stocks. As of last week, a basket of companies with the highest short interest was trading at the lowest level versus the S&P 500 in a year.
4) Trade Tremors Deepen Biggest Stock Dislocation in a Generation
Growth is so precious in stock markets these days that a millennial stock picker can hardly remember the last time investors were so enamored of it. In Europe as in the U.S., stocks promising high earnings and sales growth have hit a new record high relative to value stocks — newly dubbed a “widowmaker” trade for their persistent losses — in MSCI Inc. indexes going back to 1995. There are good reasons for investors to bid up so-called growth stocks.
5) Top ANC Officials Clash Over South African Reserve Bank Mandate
South African Finance Minister Tito Mboweni backed the central bank’s existing mandate of targeting inflation only hours after the ruling party’s top decision- making body called on the government to expand the remit to include economic growth and job creation. Enoch Godongwana, the head of economic transformation at the African National Congress, has also come to the Reserve Bank’s defence.
6) SARB Won’t Bail Out South Africa’s State Firms, Kganyago Says
South Africa’s central bank won’t bail out the country’s troubled state-owned companies including power utility Eskom Holdings SOC Ltd. because it would fuel inflation, Governor Lesetja Kganyago said.
7) South African Rate Cuts No Sure Thing Even as Economy Contracts
South Africa’s deepest quarterly economic contraction in a decade won’t automatically move the Reserve Bank to cut its key interest rate because this may drag down the country’s potential growth rate. The difference between potential growth and actual expansion is one of the four elements in the central bank’s quarterly projection model.
8) Oil Drops as U.S. Stockpiles Report Stokes Fears of Supply Glut
Oil resumed declines as an industry report signalling a surprise jump in U.S. crude inventories stirred fears of a supply glut at a time when trade wars are jeopardizing the global demand outlook. Futures in New York dropped as much as 1.2% after closing up 0.4% on Tuesday following a four-day drop.