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Trump pitches for second term, Japan’s Abe announces resignation, and Fed policy shift raises heat on ECB.
President Donald Trump accepted the Republican party nomination for presidency in a speech from the White House’s South Lawn which was a mixture of attacks on his opponent and promises to spur more growth. The 71-minute speech largely sidestepped the coronavirus pandemic which has left 180,000 Americans dead. As is the norm with political speeches, he cherry picked economic data to paint his administration in the best light, while misrepresenting the positions of his opponent. According to the RealClearPolitics average of national polls Trump trails Joe Biden by 7.1 percentage points.
Abe steps down
Japanese Prime Minister Shinzo Abe announced he is resigning to undergo treatment for a chronic illness, ending his run as the country’s longest-serving leader. Stocks in Tokyo sank and the yen strengthened on reports of the announcement, as investors were surprised by the move. The moves, while dramatic, seem unlikely to turn into a major selloff as few drastic policy changes are anticipated from his successor. It is unclear when the vote to select a new leader would take place.
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Federal Reserve Chairman Jerome Powell’s outlining of the bank’s new approach to setting monetary policy yesterday has been met with some investor skepticism. With inflation remaining stubbornly low, few seem to believe the Fed can engineer an overshoot of their 2% target any time soon. One place the move will be felt in the more immediate term is across the Atlantic at the European Central Bank where a policy review is also underway. The Fed move could help President Christine Lagarde push for a similar policy for the euro area, allowing the ECB to stay more accommodative for longer.
Disparate national drivers mean there is a real mixed bag of performances from global equity benchmarks. Overnight the MSCI Asia Pacific Index added 0.1% while Japan’s Topix index closed 0.7% lower in the wake of the Abe news. In Europe, the Stoxx 600 Index had slipped 0.1% by 5:49 a.m. Eastern Time with banks by far the best performers. S&P futures pointed to a higher open, the 10-year Treasury yield was at 0.75% and gold rebounded.
U.S. personal income and spending data for July is at 8:30 a.m. with wholesale and retail inventories, and an update to the PCE deflator also at that time. The latest University of Michigan Consumer Sentiment number is at 10:00 a.m. The weekly Baker Hughes rig count is at 1:00 p.m. The Jackson Hole symposium continues.