Vice Chair Fischer joins hawkish Fed officials - 23.8.2016

US stocks closed marginally lower on Monday as investors turned cautious ahead of Federal Reserve Chair Janet Yellen’s speech on Friday at Jackson Hole, Wyoming. The dollar strengthened on Fed Vice Chairman Stanley Fischer’s hawkish comments on Sunday. Fischer was optimistic about US economy’s short term outlook and said inflation is within “hailing distance” of the Fed’s 2% target. According to the live dollar index data the ICE US Dollar Index, a measure of the dollar’s value against a basket of six major currencies, added 0.08% to 94.51. The Dow Jones industrial average ended 0.1% lower at 18529.42 weighed by declines in Apple and Johnson & Johnson. Visa was the best performer among the blue chips. The S&P 500 slipped less than 0.1% to 2182.64 led by 0.9% decline in energy stocks as oil fell. At the same time the Nasdaq composite gained 0.1% to 5244.60. Fischer’s comments signaled that the central bank is considering raising rates soon despite the disappointing second quarter GDP report which led investors revise downward the likelihood of interest rate hikes. Fischer said that at 1.6% the core personal consumption expenditure, Fed’s preferred inflation benchmark, was “within hailing distance of 2%” and he expected that the GDP growth will pick up in coming quarters. Today at 15:45 CET preliminary August Manufacturing PMI will be released by Markit. The tentative outlook is positive. At 16:00 CET July New Home Sales and Richmond Fed’s Manufacturing Index for August will come out. The tentative outlook is negative.

European stocks closed slightly higher on Monday with losses in energy stocks weighing on market indexes. The euro ended lower against the dollar while the Pound edged higher. The Stoxx Europe 600 closed 0.1% higher helped by 11% jump in Syngenta shares after a US national-security regulator cleared the proposed $43 billion purchase of the Swiss seed maker by China National Chemical Corporation. Germany’s DAX 30 ended 0.5% lower at 10494.35, relinquishing earlier gains from advancing exporters which benefitted from improved prospects with lower euro but pulled back as euro pared losses. France’s CAC 40 closed down 0.2% and the UK’s FTSE 100 lost 0.4% to end at 6828.54. Today from 09:00 to 10:00 CET preliminary August Manufacturing, Services and Composite PMIs for France, Germany and euro-zone will be released by Markit. The tentative outlook is positive for euro. At 16:00CET preliminary August Consumer Confidence will be published in euro-zone, the outlook is neutral.

Asian stocks are mixed today with the yen adding to yesterday’s gains against the dollar. Chinese shares are edging higher with Shanghai Composite Index 0.19% up and Hong Kong’s Hang Seng index flat, while Australia’s All Ordinaries Index is up 0.62%. Nikkei ended 0.6% lower today at 16497.36 despite the first rise in manufacturing output in the last six months as indicated by slightly higher flash Manufacturing PMI at 49.6 in August after coming at 49.3 in July. Exporters were hurt by stronger yen.

Oil futures prices are extending losses today after prices settled sharply lower on Monday with crude oil output set to increase in Iraq and Nigeria while expectations for output freeze agreement between major oil producers faded. Production is expected to increase by roughly 150000 barrels a day from three oil fields in the Kirkuk region in Northern Iraq in coming weeks, and Nigeria can increase production by several thousand barrels a day after Niger militants announced an end to their attacks on foreign-owned oil infrastructure. October Brent crude fell 3.4% to $49.16 a barrel on London’s ICE Futures exchange on Monday.