Treasury bond yields continued to fall yesterday, with Tnote reaching 1.24% and the German Bund dropping 2bp to -0.44%, due to an increase in risk aversion that seems more related to China. In this Asian country, losses in the stock markets continued to pile up and even intensified in the last week, as pressure from the Chinese authorities also the economic slowdown dragged them down. These declines are being transmitted to some extent to western stocks.
Elsewhere in the U.S.
The Federal Reserve’s Meeting is the main event of today, although no monetary policy changes are expected. It should be remembered that during the previous meeting on June 16, Fed went from extremely dovish to moderately dovish when targeting its dot plot to two rate hikes in 2023 vs only one discounted at that time by the market. However, Chairman Powell downplayed the dot plot due to its remoteness in a still uncertain context regarding the growth forecasts and primarily due to the lack of pace in job creation. Although inflation continues on its upward path, the Federal Reserve still considers it a transitory phenomenon with no temporal continuity.
Additionally, there is no announcement expected about the start of the reduction in its bond purchase program either. The Central Bank is still waiting to see further progress in the employment figures and the leading indicators economic indicators. Most analysts expect the Fed to announce the withdrawal of bond purchases either at the Jackson Hole meeting on August 26 or even later, at its September 22 meeting. In today's meeting, it is always possible that Mr Powell provides some signal in this regard, which, if it were earlier than expected, could impact the markets.
U.S Stock Markets
The Tech100 technology index continued its upward path, hitting new highs in recent days, although yesterday it suffered a notable decline with falls of over 1%. However, from a technical analysis point of view, the index shows signs of exhaustion of the bullish movement with a bearish divergence on the daily RSI. The earnings published today, the Federal Reserve meeting and the evolution of the stock markets in China will be the keys to take into account for the future performance of this index.
Sources: Bloomberg, reuters.com.