Stocks Hit Highs, Bonds Tumble After Powell Pivot

US stocks’ record-breaking rally continued and bond yields surged after Jerome Powell reiterated that the Federal Reserve will remain accommodative. The dollar climbed from a two-year low. The S&P 500 rose by 0.17% to 3,484.55 while Dow Jones was up 160.35 points (0.6%) to 28,492.27.

Fed Paves Way for Low-rate Era With Inflation Able to Run Higher

Federal Reserve Chair Jerome Powell unveiled a new approach to setting US monetary policy, letting inflation and employment run higher in a shift that will likely keep interest rates low for years to come. Following a more than yearlong review, Powell said that the Fed will seek inflation that averages 2% over time, a step that implies allowing for price pressures to overshoot after periods of weakness.

US Jobless Claims Resume Decline But Report Comes With Caveats

Applications for state US unemployment benefits decreased last week following an unexpected jump, indicating the labor market’s gradual recovery is back on track as Covid-19 infections ease from a surge in the prior two months. Initial jobless claims in regular state programs fell by 98,000 to 1.01 million in the week ended Aug. 22, Labor Department data showed.

Villeroy Says Credible Inflation Goal to be Heart of ECB Review

The European Central Bank’s review of how it conducts monetary policy will focus on pursuing a credible and symmetrical goal for price growth, according to Governing Council member Francois Villeroy de Galhau. “It is essential to have an inflation target,” he said after the US Federal Reserve revamped its own monetary-policy strategy. I won’t say what form it will take for us, I won’t anticipate the result. But you can be reassured that a credible and symmetrical inflation objective will remain at the heart of our action, he said.

Passenger Arrivals to UK Collapse During Pandemic Travel Curbs

The number of passengers arriving in the UK almost totally collapsed in the second quarter as coronavirus restrictions brought international travel to a standstill. Home Office figures published show there were just 1.3 million arrivals between April and June, a 97% decrease compared with the same period of 2019. Travel in recent months has also been impaired by the closure of visa application centers.

Bank of Korea’s Lee Holds Fire for Now as Growth Outlook Cut

Bank of Korea’s Governor Lee Ju-yeol held off from adding immediate stimulus even as the central bank offered a gloomier forecast for the economy grappling with a resurgence of the coronavirus. The South Korean central bank said it expects the economy to shrink 1.3% this year, far worse than the 0.2% contraction forecast in May. Following a unanimous decision to hold the seven-day repurchase rate at 0.5%.

Philippine Central Bank Doubles Green Bond Investment

The Philippine central bank has more than doubled its green bond holdings in a sign that debt used to fund environmental and social projects is gaining popularity among emerging-market policy makers. Governor Benjamin Diokno said the bank has invested US$200 million in green bonds this year, after placing an initial US$150 million in 2019.

Oil and Gasoline Dip With Refineries Spared From Worst of Laura

Oil declined after Laura barreled into Louisiana, largely sparing the Texas Gulf Coast from widespread disruption to key energy infrastructure. Brent crude for October settlement down US$0.55 to US$45.09 per barrel.

Source: Affin Hwang Research - 28 Aug 2020