Morning quote: Powell’s feint | Reuters

Federal Reserve Chairman Jerome Powell and his wife Elisa Leonard attend a dinner program at Grand Teton National Park where financial leaders from around the world gather for the Jackson Hole Economic Symposium outside Jackson, Wyoming, U.S., August 25, 2022 .REUTERS/Jim Urquhart

A look at the day ahead in US and global markets by Mike Dolan.

With just four hours to go before Jerome Powell takes the podium in Jackson Hole, all the ifs and buts have been discussed and the sharp last-minute market positioning done and dusted.

The only remaining concern is that it could be a wet knife.

The head of the Federal Reserve delivers his hotly anticipated speech at 1000 EDT. (1400 GMT)

But the flurry of comments and interviews from his Federal Reserve counterparts over the past 24 hours has left markets with little new to chew on about the policy trajectory. Read more

Interest rate futures are entering the set with a much fiercer bias compared to early August, putting the Fed’s peak “end” rate early next year at around 3.8%. Still, that’s still below the 4% peak they expected in mid-June, and there’s still at least one rate cut from there until the end of 2023.

Powell is unlikely to be specific about a decision next month, preferring to wait for critical jobs and inflation data before then. A July easing of the Fed’s preferred measure of inflation – the core index of personal consumption expenditures – is likely to be seen before he speaks later.

However, futures are again leaning towards a 60% chance of another 75 basis point increase at the September meeting.

One possible focus is that Powell avoided detailed guidance on “peak rates” but emphasized that they were unlikely to be cut at all next year. Any finer points in the Fed’s balance sheet summary will also be played out, with some analysts now fearing continued assumptions about the pace of so-called “quantitative tightening” could drain commercial bank reserves too quickly into a sharp slowdown next year .

Although bond markets faltered and the dollar bounced back in anticipation of this week’s speech, Wall St stocks looked less worried – staging their best one-day rally in two weeks on Thursday and stock futures paring those gains today.

While Bank of America’s weekly total of investment flows shows further outflows from most asset classes and overall positioning still “maximum downside,” financial stocks stood out this week with their biggest inflows since January. Read more

Powell aside, global markets were focused on Friday on Europe’s deepening energy crisis and China’s latest plans to boost infrastructure spending. Copper prices hit their highest levels in two weeks last.

But it’s shaping up to be a cold winter. Describing it as a real “crisis”, UK regulators announced that household energy bills will rise by 80% a year from October. read more Skyrocketing energy bills also led to a record low in consumer confidence in Germany for the third consecutive month. Read more

Brent crude, so crucial to inflation and the central bank’s narrative this year, pared this week’s gains to $100 a barrel – largely on concerns that OPEC would cut output if a nuclear deal pushed Iranian crude back to global levels. markets. Read more

Key developments that should provide more guidance to US markets later on Friday:

* July US personal consumption, core PCE price index

* US preliminary trade balance in July

* Michigan’s August U.S. Consumer Sentiment Index latest reading

* Fed chief Jerome Powell speaks in Jackson Hole at 1400 GMT

By Mike Dolan Editing by Kim Coghill mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD

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