NEWSLETTER
Thursday / September 29Sep 29
Thursday / August 18
FOMC minutes
US Federal Reserve officials saw "little evidence" late last month that U.S. inflation pressures were easing according to the minutes of their July 26-27 policy meeting.
While not explicitly hinting at a particular pace of coming rate increases, beginning with the Sept. 20-21 meeting, the minutes showed U.S. central bank policymakers committed to raising rates as high as necessary to tame inflation.
Minutes released on Wednesday also showed that members began to acknowledge more explicitly the risk they might go too far and curb economic activity too much.
“Participants judged that, as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation,” the minutes said.
They added, “participants judged that a significant risk facing the Committee was that elevated inflation could become entrenched if the public began to question the Committee’s resolve to adjust the stance of policy sufficiently. If this risk materialized, it would complicate the task of returning inflation to 2 percent and could raise substantially the economic costs of doing so.”
"Participants agreed that there was little evidence to date that inflation pressures were subsiding. Participants emphasized that a slowing in aggregate demand would play an important role in reducing inflation pressures," the minutes said.
US data
U.S. retail sales were unexpectedly unchanged in July as falling gasoline prices weighed on receipts at service stations.
Last month's flat reading in retail sales followed a downwardly revised 0.8% increase in June. Retail sales in June were previously reported to have advanced 1.0%. Economists polled by Reuters had forecast that sales would gain 0.1%, with estimates ranging from as low as a 0.3% decline to as high as a 0.9% increase. Sales rose 10.3% on a year-on-year basis in July.
The national average gasoline price dropped to about $4.27 per gallon in the last week of July after hitting an all-time high just above $5.00 in mid-June, according to data from motorist advocacy group AAA. Prices at the pump were averaging $3.943 per gallon on Wednesday.
Sales at service stations tumbled 1.8% last month, while receipts at auto dealerships declined 1.6%. Excluding gasoline and motor vehicles, retail sales rose 0.7%.
Russia-China alignment
China is sending troops to Russia as part of strategic military exercises for the first time since 2018.
The Vostok (East) exercises will take place from August 30 to September 5 in the eastern portion of Russia as the war in Ukraine goes on and Beijing rattes up threats to Taiwan.
The Chinese military first attended Vostok drills in 2018, where an estimated 300,000 troops participated in the district that includes a portion of Siberia and has headquarters in Khabarovsk close to the Chinese border.
China Defense Ministry officials in a statement said the exercises "are in no way related to the current international and regional situation," Russian news agency TASS reported.
Wall Street
US stocks fell on Wednesday.
The Dow Jones Industrial Average shed 171.69 points, or 0.5%, to close at 33,980.32. The S&P 500 slid 0.72% to close at 4,274.04, while the Nasdaq Composite tumbled 1.25% to 12,938.12.
The 30-stock index snapped its 5-day win streak. The S&P 500 and Nasdaq have slipped 0.14% and 0.84%, respectively, since the start of the week.
Bond yields also rose, with the 10-year Treasury note up about 7 basis points at 2.9% as recessionary fears and uncertainty regarding the Fed’s rate-hiking path persisted.
Norwegian loss
Norway’s sovereign wealth fund, the largest in the world, had a loss of 1.68 trillion Norwegian kroner ($174 billion) in the first half of 2022, as stock markets more broadly saw a tumultuous six months.
The $1.3 trillion fund returned a negative 14.4% during the period, as stocks and bonds reacted violently to global recession fears and skyrocketing inflation. But the fund’s return was 1.14 percentage points better than the return of the benchmark index, Norges Bank, the country’s central bank, said Wednesday, equivalent to 156 billion kroner.
The fund’s return on equity investments slipped 17%, while fixed income investments and unlisted renewable energy infrastructure were down 9.3% and 13.3%, respectively.
Norway’s vast North Sea oil and gas reserves are the bedrock of the fund’s wealth. Energy was the only sector to not see negative returns after the fund made huge investments in wind power in recent years.
US Federal Reserve officials saw "little evidence" late last month that U.S. inflation pressures were easing according to the minutes of their July 26-27 policy meeting.
While not explicitly hinting at a particular pace of coming rate increases, beginning with the Sept. 20-21 meeting, the minutes showed U.S. central bank policymakers committed to raising rates as high as necessary to tame inflation.
Minutes released on Wednesday also showed that members began to acknowledge more explicitly the risk they might go too far and curb economic activity too much.
“Participants judged that, as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation,” the minutes said.
They added, “participants judged that a significant risk facing the Committee was that elevated inflation could become entrenched if the public began to question the Committee’s resolve to adjust the stance of policy sufficiently. If this risk materialized, it would complicate the task of returning inflation to 2 percent and could raise substantially the economic costs of doing so.”
"Participants agreed that there was little evidence to date that inflation pressures were subsiding. Participants emphasized that a slowing in aggregate demand would play an important role in reducing inflation pressures," the minutes said.
US data
U.S. retail sales were unexpectedly unchanged in July as falling gasoline prices weighed on receipts at service stations.
Last month's flat reading in retail sales followed a downwardly revised 0.8% increase in June. Retail sales in June were previously reported to have advanced 1.0%. Economists polled by Reuters had forecast that sales would gain 0.1%, with estimates ranging from as low as a 0.3% decline to as high as a 0.9% increase. Sales rose 10.3% on a year-on-year basis in July.
The national average gasoline price dropped to about $4.27 per gallon in the last week of July after hitting an all-time high just above $5.00 in mid-June, according to data from motorist advocacy group AAA. Prices at the pump were averaging $3.943 per gallon on Wednesday.
Sales at service stations tumbled 1.8% last month, while receipts at auto dealerships declined 1.6%. Excluding gasoline and motor vehicles, retail sales rose 0.7%.
Russia-China alignment
China is sending troops to Russia as part of strategic military exercises for the first time since 2018.
The Vostok (East) exercises will take place from August 30 to September 5 in the eastern portion of Russia as the war in Ukraine goes on and Beijing rattes up threats to Taiwan.
The Chinese military first attended Vostok drills in 2018, where an estimated 300,000 troops participated in the district that includes a portion of Siberia and has headquarters in Khabarovsk close to the Chinese border.
China Defense Ministry officials in a statement said the exercises "are in no way related to the current international and regional situation," Russian news agency TASS reported.
Wall Street
US stocks fell on Wednesday.
The Dow Jones Industrial Average shed 171.69 points, or 0.5%, to close at 33,980.32. The S&P 500 slid 0.72% to close at 4,274.04, while the Nasdaq Composite tumbled 1.25% to 12,938.12.
The 30-stock index snapped its 5-day win streak. The S&P 500 and Nasdaq have slipped 0.14% and 0.84%, respectively, since the start of the week.
Bond yields also rose, with the 10-year Treasury note up about 7 basis points at 2.9% as recessionary fears and uncertainty regarding the Fed’s rate-hiking path persisted.
Norwegian loss
Norway’s sovereign wealth fund, the largest in the world, had a loss of 1.68 trillion Norwegian kroner ($174 billion) in the first half of 2022, as stock markets more broadly saw a tumultuous six months.
The $1.3 trillion fund returned a negative 14.4% during the period, as stocks and bonds reacted violently to global recession fears and skyrocketing inflation. But the fund’s return was 1.14 percentage points better than the return of the benchmark index, Norges Bank, the country’s central bank, said Wednesday, equivalent to 156 billion kroner.
The fund’s return on equity investments slipped 17%, while fixed income investments and unlisted renewable energy infrastructure were down 9.3% and 13.3%, respectively.
Norway’s vast North Sea oil and gas reserves are the bedrock of the fund’s wealth. Energy was the only sector to not see negative returns after the fund made huge investments in wind power in recent years.
