Photographer: Prashanth Vishwanathan/Bloomberg
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Yellen's faith in inflation pickup wavers, Bank of Canada hikes for first time since 2010, and fresh records for U.S. stocks. Here are some of the things people in markets are talking about.
Fed Chair Janet Yellen struck a subtly different tone on the inflation outlook during her first of two days of testimony before Congressional committees, prompting traders to pare their bets on an additional interest rate increase this year. Despite this mysteriously low inflation, the chair reiterated the central bank’s plans to continue gradually tightening policy. Yellen also ducked questions about her future at the central bank amid reports that Gary Cohn — former Goldman Sachs COO and the head of the White House’s Council of Economic Advisers — will be nominated to succeed her.
Canadian Convergence Commences
The Bank of Canada hiked its policy rate to 0.75 percent on Wednesday, as expected, while sounding a more hawkish tone than investors anticipated. The Canadian dollar then soared to a one-year high versus the greenback. In raising rates despite sluggish inflation, the move echoed the Federal Reserve’s June increase. The Bank of Canada’s tightening could mark the start of a synchronized removal of monetary stimulus in advanced economies, something policymakers hinted during the European Central Bank’s conference in late June.
The Dow Jones Industrial Average closed at a record high amid Yellen's remarks, which investors interpreted as dovish, all in all. But earnings growth for U.S. publicly traded companies is poised to meaningfully decelerate in the second-quarter reporting season. The Fed chair's testimony also helped fuel a retreat in the U.S. dollar and Treasury yields. Crude oil continued to defy Goldman Sachs's call for a break of $40 per barrel, rising more than 1 percent after the weekly inventories report showed a large shrinkage in U.S. stockpiles.
S&P/ASX 200 and Nikkei 225 futures are heading higher in the pre-market session. Central bank decisions from South Korea and Malaysia headline the economic calendar in the region, though no rate change is expected from monetary policymakers in either nation. Also on deck: Japanese international securities transactions for the week ending July 7 as well as New Zealand house sales for June, which tumbled 18.4 percent year-on-year in their previous reading. Chinese trade data for May could also be released, with economists expecting the trade surplus to swell to $42.6 billion.
Amazon offered a prime example of why it leaves a trail of scared competitors in its wake -- and why firms are taking steps to insulate themselves from the e-commerce giant. Prime Day sales generated roughly $1 billion in revenues, according to analysts' estimates. The day of discounts has a successful track record in generating subscriptions to boot. Amazon shares closed up 1.3 percent on Wednesday.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Yuan needs an overhaul to compete with the greenback.
- Brazil's former president gets prison sentence.
- 15 things global macro investors should have learned.
- Milking cows: the future of asset management.
- Indian inflation hits record low.
- China strikes a balance between credit growth and growth.
- Beer + Lucky Charms.