Yesterday afternoon’s relief rally which pushed US indices to gains of 0.9% to 1.4% has evaporated overnight. This morning finds US index futures down 0.4%-0.6%, while in Europe, the Dax is down 1.5% and the FTSE is down 0.3%. The US Dollar is rallying today, gaining 1.1% against the Australian Dollar, 0.6% against the Euro and 0.4% against the Loonie. Energy and metals are mixed. Gold is up 0.1%, Silver is down 0.9%, Copper is up 0.3%, Crude Oil is up 0.3%, Natural Gas is down 1.1%.
Over the last eighteen hours, three central banks held their benchmark interest rates steady, the Federal Reserve Board (4.50%), the Peoples’ Bank of China (3.1%) and the Bank of England (4.5%). The Swiss National Bank cut its benchmark rate by 0.25% to 0.25% as had also been widely expected.
These decisions suggest that, even though the risk of trade wars negatively impacting the economy remains high (as mentioned by the Bank of England), the potential for stagflation (with Fed members lowering their GDP forecast and raising their inflation forecast), and recent economic data indicating a softening economy—especially in the US—some central banks do not appear to be in a hurry to ride to the rescue of the market or the economy with massive stimulus. The Fed did start to wind down its Quantitative Tightening program, but taking one’s foot off the brake is not the same as putting one’s foot on the gas.
After the close today, earnings reports are due from Nike, FedEx, Lennar and Micron Technology which may help to shed more light on the current state of the economy. Canada retail sales are due tomorrow morning.