Equities rebounded overnight and Dollar reversed gains as Fed governor Lael Brainard's comments suggested that Fed is not ready to hike in the FOMC meeting next week. DJIA closed up 239.62 pts, or 1.32%, at 18325.07. S&P 500 closed up 31.23 pts, or 1.47%, at 2159.04. Sentiments followed in Asian session with Nikkei opened higher even though it loses momentum quickly. Hong Kong HSI is trading up 1% at the time of writing. The development also sent gold mildly higher to around 1335 after dipping to 1323.3 yesterday. WTI crude oil is back pressing 46 handle after dipping to 44.72. Dollar index, on the other hand, is struggling around 95 after recovering to 95.58 last week. As of yesterday, fed fund futures are pricing in 15% chance of September hike, down from prior day's 24.0%.
Fed governor Lael Brainard warned in a speech to the Chicago Council that muted inflation and uncertain developments "counsels prudence in the removal of policy accommodation." And she emphasized that "this approach has served us well in recent months, helping to support continued gains in employment and progress on inflation." She noted that "foreign consumption and investment are weak " and "downside risks are also present in emerging market economies". In particular, "China is undergoing a challenging transition" and "growth will likely continue to slow". The speech confirmed that Brainard, as a known dove, didn't chance her stance in spite of recent development.
Also in US, Atlanta Fed president Dennis Lockhart "the economy is sustaining sufficient momentum to substantially achieve the (Fed's) monetary policy objectives in an acceptable medium-term time horizon." He expects a "stronger second half" for GDP growth and job market has been progressing towards full employment. However, inflation remained sluggish mixed data painted "an awkward state of affairs". He noted that the September FOMC meeting warrants a "serious discussion" on interest rate.
Released in China, industrial production rose 6.3% yoy in August, up from 6.0% yoy and beat expectation of 6.2% yoy. Retail sales rose 10.6% yoy, up from 10.2% and beat expectation of 10.2%. Fixed assets investments rose 8.1% yoy, unchanged from prior month's and beat expectation of 7.9% yoy. Some economists noted that the set of data were solid and affirmed that the economy is stabilizing. From Japan, BSI large manufacturing rose to 2.9 in Q3. Australia NAB business confidence rose to 6 in August.
Looking ahead, inflation data are the main focus in European session today. Germany will release Germany CPI final, Swiss will release PPI, UK will release CPI and PPI. In addition, Eurozone will release employment while Germany will release ZEW economic sentiment.