Central Banks Continue To Rule The Markets
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Monetary Policy Ease Almost Everywhere
The central banks remain in control of the markets as since 2008 it has been up to them to patch the global economy back together again. Unfortunately, as we learned back in the Great Depression, monetary policy is not very effective at stimulating growth. Banks trying to work off bad loan portfolios are not likely to be aggressive lenders, and potential borrowers tend to restrain their consumption as they try to dig themselves out of a hole. The answer is usually that the economy needs a significant fiscal stimulus, but most countries are reluctant to spend because they face significant budget deficits because of reduced tax collections. This is the dilemma that just about everyone is facing at the current time.
The worry now is that the global economy might be moving into a recession. We have seen fresh monetary stimulus recently from the Bank of Japan, Bank of England and Reserve Bank of Australia. Next week, the Reserve Bank of New Zealand is expected to cut rates. Also keep in mind that The European Central Bank has already been running a negative interest rate scheme. Furthermore, Swiss bond yields are negative all the way out to the 30 year maturity.
Turning Point In U.S. Employment Data?
The July U.S. Jobs data were considerably stronger than expected with Non-Farm payrolls improving by 255K in the month, while the strong June figure was revised even higher. Markets had been looking for a gain of around +180K in the month. Furthermore average hourly earnings improved when no improvement (+0.20%) had been foreseen. These data should give heart to the long suffering Fed policy hawks. One more set of jobs data are scheduled before the next policy decision on September 21.
WEEKLY HIGH IMPACT NEWS:
8-Aug MON
01:30 CN- CPI
06:15 CH- CPI
9-Aug TUES
12:30 US- Productivity
10-Aug WED
00:00 JP- Holiday
14:00 US- JOLTS Survey
15:00 US- Weekly Crude
21:00 NZ- RBNZ decision
11-Aug THU
12:30 US- Weekly Jobless
12-Aug FRI
09:00 EZ- GDP
12:30 US- Retail Sales
14:00 US- University of Michigan (prelim)