SMM: now the market seems to be back to risk aversion, under the impact of a number of news, investors are trying to sort out in the chaos. Despite overnight important signals from Federal Reserve Chairman Colin Powell that bond purchases will resume, risk sentiment has been weighed down by trade negotiations and British uncertainty between China and the United States, stock markets have sold off, favor for the yen and gold has risen sharply, and the dollar has maintained a strong posture. This trading day, the market paid special attention to the minutes of the Fed meeting.
You want to expand your watch soon? Powell sends a big signal.
The dollar rose against most currencies except the yen overnight, with the U. S. index continuing to gain a foothold above the 99 level, and the dollar remained strong in early trading in Asia on Wednesday.
(daily chart of dollar index source: 24K99)
The monthly Pi rate unexpectedly fell in September, the biggest decline in eight months and the slowest year-on-year increase in nearly three years, according to data released by the Labor Department on Tuesday.
Economists say the general weakness in producer price inflation reflects the downturn in manufacturing.
The agency commented that this month's PPI data had been affected by lower costs for goods and services, which could give the Fed room to cut interest rates again this month to limit the drag on growth caused by the trade situation and the slowdown in the global economy.
Despite an unexpected drop in producer inflation in the United States, Federal Reserve Chairman Colin Powell did not promise further interest rate cuts in a speech to the National Association of Business Economics on Tuesday.
However, Mr Powell said it was time for the Fed's balance sheet to start expanding again and that the Fed would "soon announce measures to gradually increase the supply of reserves".
Albion Financial Group Investment Director Jason Ware pointed out that Powell appears to be trying to show the market that the Fed continues to focus on downside risks and is willing to actively support economic growth if necessary.
"I'm not surprised that given what happened in the repo market two weeks ago, the Fed needs to come up with something more than just a short-term solution," said Justin Lederer, a bond analyst and trader at Cantor Fitzgerald. The operation is short-term and I think bond purchase is the ultimate long-term solution. "
Expectations that the Fed would cut interest rates by 25 basis points at its meeting later this month rose to 83.9% on Tuesday, up from 74.8% the day before, according to the FedWatch tool of (CME Group), the Chicago Mercantile Exchange group.
The bad news is that the market is likely to sell more violently?
Although Powell hinted at being open to further interest rate cuts, the Jedi failed to fight back, as risk sentiment was weighed down by trade negotiations between China and the United States and uncertainty over Britain's retreat.
All three major U. S. stock indexes closed down on Tuesday. By the end of the day, the Dow Jones industrial average was down 313.98 points, or 1.19%, at 26164.04, while the S & P 500 was down 45.73 points, or 1.56%, at 2893.06. The Nasdaq index fell 132.52 points, or 1.67 percent, to 7823.78.
Brexit: the new "Brexit" plan submitted by the British government to the European Union on October 2 has carried out a new design of the "backup arrangement" for the Northern Ireland border. British Prime Minister Johnson warned that if the European Union wants to reach an agreement, the new plan will be the last chance, if the European Union does not accept the plan, Britain will be "no agreement to leave the European Union" on October 31.
Some EU leaders have been lukewarm about the new Brexit deal proposed by the UK, arguing that it is not enough for the EU and the UK to reach a new Brexit agreement. In recent days, British and EU officials have continued to negotiate an "Brexit" agreement, with the two sides striving to finalize the latest Brexit agreement ahead of the EU summit on October 17. French President Francois Macron said today that the European Union may announce whether to adopt the new plan by the end of this week.
According to the latest news, quoting people familiar with the British prime minister's office, Prime Minister Johnson told German Chancellor Angela Merkel that it is now basically impossible to reach a Brexit agreement with the European Union because the European Union refuses to make concessions in the negotiations.
Johnson and Merkel spoke on the phone on Tuesday, Merkel told Johnson that Northern Ireland must stay in the EU guan tax union-which is unacceptable to Britain. It is reported that this latest requirement, coupled with the EU's reluctance to consider Johnson's plan, will make it virtually impossible to achieve the Brexit agreement.
Lars Merklin, strategist at Dansk Bank, said the recent trading week highlighted how fragile the pound was in August and September and was likely to extend the Brexit deadline in the coming weeks.
Trade negotiations: the Commerce Department has blacklisted 28 new companies and institutions, including Chinese companies banned from doing business in the United States, focusing on companies that specialize in artificial intelligence, machine learning and digital monitoring.
On Tuesday night, Beijing time, in response to the US Department of Commerce's inclusion of 28 Chinese entities in the export control "entity list", a spokesman for the Chinese Ministry of Commerce said in a statement, noting that the US Department of Commerce has added 28 Chinese entities to the export control "entity list" and will continue to monitor the situation. It also pointed out that we strongly urge the US side to immediately stop gossiping on the Xinjiang issue, stop interfering in China's internal affairs, and remove the relevant Chinese entities from the "list of entities" as soon as possible. China will also take all necessary measures to resolutely safeguard China's own interests.
"the stock market fell because of the negative interest rate before the start of negotiations between China and the United States. Powell did not change his language and it makes sense for the market to sell off amid more signs of a worsening trade situation, "said Keith Lerner, chief market strategist at SunTrust Advisory Services.
Affected by the overnight fall in US stocks, Asia-Pacific stocks generally opened lower today: the Nikkei 225 index fell 1.06% at the start of trading on Wednesday, and the Tokyo Stock Exchange Index of Japan opened down 1.00%.
Spot gold was favored against the backdrop of a falling stock market, with gold prices rising more than $10 to more than 1500 overnight and hitting 1509 levels. In early trading in Asia on Wednesday, gold prices continued to hover above 1500.
(daily chart of spot gold source: 24K99)
"the stock market is falling, so gold is taking back its role as a safe haven," said Carlo Alberto De Casa, chief analyst at ActivTrades. The market is also concerned about the trade negotiations and the progress of Brexit. "
Craig Erlam, senior market analyst at OANDA, said: "Gold seems to be relatively stable at the moment, which has to do with the fact that we are in a fragile risk environment."
Phillip Streible, senior commodity strategist at RJO Futures, said trade negotiations could be deadlocked for these reasons, so some money flocked to safe-haven products. "[but] the price of gold is currently fluctuating in a range. $1465 is at the bottom of the range, $1566 is at the top, and that's where we're stuck. "
"Gold ETF positions are close to their highest level in years, so there must be demand for gold because of trade tensions and a slowdown in global economic growth," said Sergey Raevskiy, an analyst at SP Angel. "
Focus on the minutes of the Federal Reserve meeting
This trading day, the market focused on the minutes of the Fed meeting. The Fed will release minutes of its September meeting at 2 a.m. Beijing time on Thursday, where it will look for clues as to whether it will cut interest rates for the third time this year at its October meeting.
The Fed has cut interest rates twice this year, 25 basis points each. Fed officials will hold a monetary policy meeting from October 29 to 30.
Investors forecast an 80 per cent chance of the Fed cutting interest rates by 25 basis points to 1.5 to 1.75 per cent, according to the Fed Watch (FedWatch) tool of (CME Group), a Chicago Mercantile Exchange group.
On Tuesday, Powell reiterated the position repeatedly stated by the Fed in its policy statement since the summer, saying that the Fed "will take appropriate action to support sustained economic growth."
Powell pointed out that over the past few months, inflation "is gradually stabilizing." Powell did not provide any specific guidance to investors on the Fed's short-term interest rate plan, saying only that the meeting scheduled for the end of October was "a few weeks away."
"We are carefully monitoring the incoming information," he said. Our decisions will depend on the data, and at each meeting we will assess the prospects and the risks involved. "
In addition, prior to the release of the minutes, Federal Reserve Chairman Powell will co-chair a "Fed listening" round table with local business and community leaders to discuss job market conditions, local banking, community development challenges, and other topics. The market also remains concerned.
Prospects for the future of gold
Dow Securities strategists said the risk of another "earnings recession" similar to that of 2015-2016 was rising, as was the risk of a price correction, especially for growth stocks. In this context, the reasons for holding precious metals as a hedge against the tail of stocks are still growing. At the same time, ETF purchases have soared by about 20 per cent year-on-year and show no sign of slowing. The interest rate environment has also fuelled the pro-gold camp.
George Gero, managing director of (RBC Wealth Management), a wealth management company at Royal Bank of Canada, said: "Today's rise in gold prices is a response to the fall in the stock market, as investors worry about trade issues, Brexit, the Middle East and Turkey. In this period of uncertainty, investors see gold as a sensible choice. "investors around the world have found reasons for concern, and holding gold is one of the solutions. Gold is still watching the $1500 region, and gold prices have since rebounded as more political, geopolitical and risk aversion headlines emerge. "
'i don't think gold has reached its peak yet and any correction in gold prices should be seen as a buying opportunity, 'said Dominic Schnider, head of foreign exchange and economics at UBS Wealth Management Asia Pacific. For the future of gold prices, Schnider expects gold prices to reach $1550 by the end of this year and $1650 by the end of 2020.
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