US Federal Reserve Chair Jerome Powell noted in a speech to the Jackson Hole central bank symposium: “Restoring price stability will likely require maintaining a restrictive policy stance for some time.” And further: “The historical record cautions strongly against prematurely loosening policy.”
In US economic data, personal income rose by 0.2% in July (survey: +0.6%) with spending up 0.1% (survey: +0.5%). The key inflation measure – the core PCE deflator – lifted by 0.1% in July to be up 4.6% on the year (survey: +4.7%). The advance goods trade deficit fell from US$98.59 billion to US$89.06bn in July (survey: – US$97bn). The final University of Michigan consumer sentiment index rose from 55.1 to 58.2 in August (survey: 55.2).
European sharemarkets fell on Friday. Investors digested the speech from the Fed chair and weak German consumer sentiment data. The pan-European STOXX 600 index fell by 1.7% to be down 2.6% over the week. The German Dax index lost 2.3%. The UK FTSE index fell by 0.7%. But in London trade, shares of Rio Tinto rose by 0.6% and BHP shares lifted 0.3%.
US sharemarkets slumped on Friday as the Fed chair suggested interest rates would be higher for longer. All 11 S&P 500 sectors were lower. At the close of trade, the Dow Jones index was lower by 1,008 points or 3.0%. The S&P 500 index fell by 3.4% and the Nasdaq index slumped by 497.6 points or 3.9%. Over the week the Dow fell 4.2%; the S&P 500 lost 4.0%; and the Nasdaq fell 4.4%.
US treasuries were weaker on Friday (yields higher). US 10-year yields rose by 1 point to 3.03%. And US 2-year yields rose by around 1 point to near 3.38%. Over the week US 10-year yields rose by 5 points with 2-year yields up 14 points.
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Major currencies were mixed against the US dollar in European and US trade. The Euro rose from lows near US$0.9945 to highs near US$1.0080 and was near US$0.9960 at the US close. The Aussie dollar fell from highs near US70.05 cents to lows near US68.90 cents and was near session lows at the US close. And the Japanese yen eased from near 136.38 yen per US dollar to JPY137.53 and ended US trade near session lows at US close.
Global oil prices rose on Friday. Fears that the OPEC+ group could cut production offset hawkish comments from the Fed chair. The Brent crude oil price rose by US$1.65 or 1.7% to US$100.99 a barrel. And the US Nymex crude oil price rose by US54 cents or 0.6% to US$93.06 a barrel. Over the week Brent rose by US$4.27 or 4.4%. And Nymex rose by US$2.29 or 2.5%.
Base metal prices were higher on Friday. Aluminium rose most, up 2.4%, while nickel bucked the trend, down 0.2%. Metals were mixed over the week. Aluminium rose 4.6% and nickel fell 2.9%.
The gold futures price fell by US$21.60 an ounce or 1.2% to US$1,749.80 an ounce. Spot gold was trading near US$1,737 an ounce at the US close. Over the week gold fell by US$13.10 or 0.7%. Iron ore futures rose by US42 cents or 0.4% to US$105.38 a tonne. Over the week iron ore rose by US$1.17 or 1.1%.
Ahead: In Australia, retail trade data is released. In the US, the Dallas Federal Reserve manufacturing activity index is scheduled.
Originally published by CommSec