Macro Roundup (Aug 26)

SHANGHAI, Aug 26 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The dollar dipped on Tuesday as investors waited on comments from Federal Reserve Chairman Jerome Powell on Thursday about the US central bank’s policy framework review, and after data showed improving German business morale.

The major focus for the dollar this week will be whether the Fed’s Powell signals that the US central bank will shift its inflation target to an average. This would allow inflation to rise higher than previously before the Fed raises rates, which would be a further negative for the dollar.

Rock-bottom interest rates and concerns about a more dovish inflation policy have reduced the relative appeal of the US currency, while a relatively high level of COVID-19 infections is also casting doubts on the speed of the US economic recovery compared with other regions, including Europe.

Data on Tuesday showed that US consumer confidence dropped to a more than six-year low in August as households worried about the labor market and incomes, casting doubts on the sustainability of the economy’s recovery from the COVID-19 recession.

Gold prices fell on Tuesday as growing optimism over US-China trade relations dented the metal’s safe-haven appeal, while investors awaited a speech by Federal Reserve Chair Jerome Powell this week.

Spot gold fell 0.6% to $1,920.91 per ounce. US gold futures settled down 0.8%, at 1,923.10.

Top US and Chinese trade officials on Tuesday reaffirmed their commitment to a Phase 1 trade deal, adding to positive news over progress in developing a treatment for COVID-19.

On Wall Street, the Dow Jones Industrial Average lost 60 points as Apple, the gauge’s biggest influence, snapped a five-day winning streak. The tech giant closed the session down about 0.8%. The S&P 500 gain 0.36%, to notch its 17th record close of 2020. The Nasdaq Composite also closed at a record after popping 0.76%.

China and the US resumed trade talks on Tuesday. In a statement, the Office of the US Trade Representative said that both sides made “progress and are committed to taking the steps necessary to ensure the success of the” phase one trade deal.

Markets were “bolstered by converts finally joining the party, by recent persistent declines in Covid cases, the halo of ongoing new treatments, and renewed progress on trade negotiations with China,” said Jim Paulsen, chief investment strategist at the Leuthold Group.

Crude oil prices rose on Tuesday, hitting a five-month high as US producers shut most output in the Gulf of Mexico ahead of Hurricane Laura even as rising coronavirus cases in Asia and Europe capped gains.

Brent futures rose 83 cents, or 1.8%, to $45.96 a barrel, while West Texas Intermediate crude rose 73 cents, or 1.7%, to settle at $43.35 per barrel.

US producers cut crude output ahead of Hurricane Laura at a rate approaching the level of 2005’s Hurricane Katrina and halted most oil refining along the Texas/Louisiana coast.

Laura is expected to strengthen into a major hurricane with 115 mile per hour (185 kph) winds when it strikes the coast near the Texas-Louisiana border early Thursday, according to the US National Hurricane Center.

On Monday, energy firms shut 1.5 million barrels per day of crude output, 82% of Gulf of Mexico’s offshore production, near the 90% outage that Katrina brought 15 years ago.

Nonferrous metals on the LME rose across the board on Tuesday. Copper added 0.29%, aluminium advanced 0.51%, zinc rose 1.18%, lead strengthened 0.34%, nickel increased 0.67% and tin inched up 0.03%.

Shanghai base metals, except for aluminium and lead, cruised higher in overnight trading. Copper advanced 0.16%, zinc climbed 0.63%, nickel rose 1.36% and tin edged up 0.02%, while aluminium closed flat and lead weakened 0.63%.

Inventory data from the US Energy Information Administration (EIA) and US durable goods orders for July will be released today.