EUROPEAN CLOSING REPORT
FRIDAY – 25TH – AUGUST – 2017
Fed Chair Janet Yellen did not address the outlook for US monetary policy in her remarks at Jackson Hole this afternoon. Instead, she launched a staunch defence of regulations put in place since the financial crisis, arguing that they have made the system safer and contributed to today’s strong economy. Both US government bond yields and the Dollar fell sharply in response as investors were hoping for some clues on the Fed’s plans to reduce the balance sheet and the next rate increase. Economists are in agreement however that the speech will do little to increase Yellen’s chances of being reappointed when her term expires in February. In equity space, European bourses turned lower on Yellen’s remarks along with their US counterparts and are little changed at the closing bell (FTSE +0.1%, DAX 0.0%, CAC 0.0%). Elsewhere, US durable goods excluding transport were a touch stronger than expected at +0.5% month-on-month (f/c. +0.4%). The Atlanta Fed then revised their Q3 GDP tracker down to +3.4% from +3.8%. The National Hurricane Centre have also stuck to their prior forecast and expect Harvey to make landfall on the Texas coast tonight or early tomorrow. Still to come today, the US Baker Hughes rig count at 18:00 BST and ECB President Mario Draghi’s Jackson Hole appearance at 20:00 BST.
* US Durable Goods Data (Jul):
Durable Goods Orders M/M -6.8% versus -6.0% expected, previous +6.5%
Durables Ex. Transport M/M +0.5% versus +0.4% expected, previous +0.2%
* Cleveland Fed Governor Mester argued that the FOMC should be pre-emptive in raising rates, adding that she does not think they can wait until inflation gets to two-percent
* Dallas Fed Governor Kaplan called for the FOMC to be patient with rates although believes they should begin reducing the balance sheet as soon as possible.
* Fed Chair Janet Yellen speaks did not mention monetary policy in her remarks at Jackson Hole:
Substantial progress has been made toward the Federal Reserve’s economic objectives of maximum employment and price stability
The evidence shows that reforms since the crisis have made the financial system substantially safer.
Any adjustments to the regulatory framework should be
I expect that the evolution of the financial system in response to global economic forces, technology, and, yes, regulation will result sooner or later in the all-too-familiar risks of excessive optimism, leverage, and maturity transformation reemerging in new ways that require policy responses.
* Atlanta Fed GDPNow model (Q3) cut to +3.4% from +3.8% | New York Fed lower their Q3 US GDP tracker to +1.9% from +2.1%
* NHC said their prior forecast remains on track, Harvey will make landfall on the Texas coast tonight or early tomorrow.