Thursday July 11th

11-07-2019

Dow set to open 100 points higher as market continues rally following Powell’s rate-cut signal

U.S. stock index futures rose on Thursday on the back of testimony by Federal Reserve Chairman Jerome Powell that signaled easier monetary policy could be implemented later this month. Around 8 a.m. ET, Dow Jones Industrial Average futures rose 108 points, indicating a gain of 114 points at the open. S&P 500 and Nasdaq 100 futures were also higher. In testimony to the House Financial Services Committee on Wednesday, Powell said business investments across the U.S. have slowed “notably” recently as uncertainties over the economic outlook linger. As a result, expectations of an upcoming rate cut grew. “Crosscurrents have reemerged,” Powell said. “Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened. Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.” Wall Street ended Wednesday’s session seeing record highs after Powell hinted at easier monetary policy in the U.S. Gold prices surged as Powell’s comments weakened the dollar while short-term yields slipped. The minutes from the central bank’s policy meeting last month reiterated Powell’s comments. “It is fair to say that such a cut would be unprecedented in modern times given overall financial conditions and the balance of economic data,” Michael Shaoul, chairman and CEO of Marketfield Asset Management, wrote in a note. “This is not quite the same as saying it is completely unwarranted, particularly if one grants the yield curve a prognostic capability that overrides other financial markets, and to some extent the trade dispute ... represents an exogenous shock to overall economic activity that is very hard to estimate and economic data is in some cases weaker than it was last summer.” Powell testifies again on Thursday in front of U.S. Senate members. Traders are pricing in a 100% probability of a rate cut before the end of July, according to the CME Group’s FedWatch tool. Asia markets mostly rose on Thursday after U.S. Federal Reserve Chairman Jerome Powell signaled overnight that the U.S. central bank could be cutting interest rates soon. Chinese stocks were mixed on the day. The Shanghai composite rose fractionally to 2,917.76, while the Shenzhen component declined 0.15% to 9,152.77 and the Shenzhen composite fell 0.125% to 1,548.93. Hong Kong’s Hang Seng index gained 0.75%, as of 3:15 p.m. The Nikkei 225 rose 0.51% to close at 21,643.53, while the Topix gained 0.47% to finish its trading day in Tokyo at 1,578.63. In South Korea, the Kospi added 1.06% to close at 2,080.58. Oil prices hit a six-week high on Thursday as oil rigs in the Gulf of Mexico were evacuated ahead of a storm, while an incident with a British tanker in the Middle East highlighted tensions in the region. Brent crude futures reversed early losses and were up 40 cents at $67.41 a barrel by 0852 GMT. Earlier in the session they hit their highest since May 30 at $67.65, after ending Wednesday up 4.4%. U.S. West Texas Intermediate crude futures were up 33 cents, at $60.76 a barrel, having earlier touched their highest since May 23 at $60.94. They gained 4.5% in the previous session. Gold prices rose to a one-week high on Thursday, extending gains from the previous session after U.S. Federal Reserve Chairman Jerome Powell’s dovish remarks bolstered expectations of an interest rate cut this month. Spot gold rose 0.1% to $1,419.64 per ounce, after earlier hitting its highest since July 3 at $1,426. The metal gained 1.5% in the previous session. U.S. gold futures jumped 0.6% to $1,421.60 an ounce.