S&P 500 stalls in economic data offset, ahead of Fed chair's speech

Daniel Fowler
August 23, 2019

A global stock index fell alongside oil prices and U.S. yields after U.S. President Donald Trump threatened to further escalate his trade war with China "this afternoon" after a new round of retaliation tariffs from Beijing.

The U.S. central bank cut its benchmark interest rate for the first time in a decade earlier this month, an indicator that it feels less confident in the prospects for the economy.

Speaking at an economic retreat in Jackson Hole, Wyoming, on Friday, Powell said there's increasing evidence of a global economic slowdown and suggested that uncertainty from Trump's trade wars has contributed to it.

The euro also was little changed against USA currency at US$1.1078.

"I don't think anyone thought we'd get to this level", said Michael O'Rourke, chief market strategist at JonesTrading.

John Williams, left, President and CEO of the Federal Reserve Bank of NY, and Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System, right, walk together after Powell's speech at the Jackson Hole Economic Policy Symposium on Friday, Aug. 24, 2018 in Jackson Hole, Wyo.

There are "no recent precedents to guide any policy response to the current situation", Powell said, adding that monetary policy "cannot provide a settled rule book for global trade".

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Even in this "challenging era", Powell said, the United States economy is in a "favorable place", which he partly attributed to the Fed's decision to cut rates in July for the first time since the financial crisis of 2008.

The confusion only heightened in the days leading to the Jackson Hole conference, at which Powell gave the keynote address.

"If we were ever data-dependent before, we have to be uber-data dependent now", she said. Bullard asked in an earlier interview Friday with CNBC television. At any rate, it is unlikely the Federal Reserve will hike rates any further.

Overnight, there were more signs of easing momentum as a survey showed U.S. manufacturing activity contracted for the first time since September 2009, though better jobless claims data indicated a resilient labour market.

Adding to the pressures on the Fed, Trump has kept up his attacks on the central bank and on Powell personally, arguing that Fed officials have kept rates too high and should be cutting them aggressively.

"This has dragged the market away from speculating about a 25- to 50-basis-point rate cut in September to a discussion on a 25 bps cut to "will they cut rates", so a bit more uncertainty has been injected into markets". "We have one of the higher rates on the yield curve". Trump tweeted, initially misspelling Powell's last name before changing it.

Powell has insisted that the White House criticism has had no effect on the Fed's deliberations over interest rate policy.

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