US equities tumbled sharply overnight as investors are getting more convinced that Fed would lift interest rates in December. DJIA closed down -254.15 pts or -1.44% at 1.7448.07 while S&P 500 dropped -29.03 pts or -1.40% to close at 2045.97. Both development indicates near term reversal ahead of respective historical high of 18351.36 and 2134.71. Dollar continues to retreat prior rally and dipped mildly overnight, staying soft in Asian session.
Fed chair Janet Yellen didn't comment on monetary policies and near term economic outlook in her remarks yesterday. New York Fed president William Dudley said, regarding interest rate, that I see the risks right now of moving too quickly versus moving too slowly as nearly balanced." Also he noted that the current 5% unemployment rate "could fall to an unsustainably low level" that threatens inflation. And the seven years of near-zero interest rates "may be distorting financial markets."
Fed Vice chair Stanley Fischer said he expected "while the dollar's appreciation and foreign weakness have been a sizable shock, the U.S. economy appears to be weathering them reasonably well." And he expected that inflation would rebound next year to 1.5% with fading impact from the strong dollar and low energy prices.
St Louis Fed president James Bullard noted that "the committee has been very clear that the normalization path here is going to be shallower." Meanwhile, Chicago Fed president Charles Evans sounded cautious and noted that "we have had different points in time since the downturn where certain regions of the world thought they could delink against the rest of the world. There’s often a trail of tears that follows that hope that their own area is stronger. That makes me nervous."
Speaking to the European Parliament in Brussels, ECB president Mario Draghi noted that "signs of a sustained turnaround in core inflation have somewhat weakened." And, "while the recovery will gradually strengthen the impulse underlying the inflation process, the protracted economic weakness of the past years continues to weigh on nominal wage growth, and this could moderate price pressures as we move forward." Also, Draghi reiterated that the central bank will re-examine its monetary policy at the next meeting on December 3. There are speculations that ECB would opt for another cut in the deposit rate, or probably expand the size of the QE program.
On the data front, Eurozone, Germany, France and Italy will release GDP today, which are the major focuses. Eurozone will also release trade balance while Swiss will release PPI. US will release retail sales, PPI, business inventories and U of Michigan sentiment.