The financial markets are trading mixed in the early part of the week so far. US equities closed lower with DJIA losing -166.62 pts or -0.91% to close at 18094.83. S&P 500 also dropped -18.59 pts or -0.86% to close at 2146.1. Treasury yields also followed as 10 year yield lost -0.026 to close at 1.589, sharply lower than this month's higher at 1.752. Nikkei followed and opened sharply lower but quickly pared losses while other Asian markets are mixed. Gold and crude oil are both gyrating in tight range around 1340 and 45 for the moment. Nonetheless, the rebound in commodity currencies and weakness in Yen today might sign a return of risk appetite ahead.
In US, Minneapolis Fed President Neel Kashkari said that FOMC's decision to stand pat last week was the "right move". Low inflation meant Fed policy makers "have time before we need to adjust rates". And, "the risks of too low inflation are greater than the risks of too high inflation." But he also noted that "if the data changes and inflation moves up, or inflation expectations move up, or we see either the headline unemployment rate drop quickly or we have some confidence that the slack in the labor market has been used up, that would then suggest to me, okay now it's time to get going." And, he "might be aligned with the hawks" then.
ECB president Mario Draghi said in European Parliament that central bank action alone "not enough for delivering real and sustainable growth in the long term." And he urged government policies to "complement" ECB's actions. Meanwhile Draghi also sounded cautious regarding negative rates and noted that "negative rates aren't a matter of yes or no; it's a matter of extent and for how long." And he warned that "very low rates for a very long time do have side effects that especially affect financial stability." ECB executive board member Benoit Coeure also said that "if fiscal and economic policies do not in fact play this role, we risk being trapped in a low growth, low interest rate equilibrium."
Bank of Canada governor Stephen Poloz talked about globalization and central bank policies. He noted that "increased integration may make it more challenging for central banks to control inflation, in the sense that doing so will require more variability in interest rates, exchange rates and the output gap." And, "a central bank that relies on a model that does not take rising trade integration into account when it should do so will tend to react too gradually and perhaps insufficiently to external shocks."
On the data front, Japan corporate service price index rose 0.2% yoy in August. Eurozone M3 and UK CBI reported sales will be featured in European session. S&P Case Shiller house price and US consumer confidence will be released later in the day.