Until today, global equity markets were having a lacklustre and directionless week as all eyes were fixed firmly on the annual Economic Policy Symposium in Jackson Hole, given Jay Powell, the Fed chair, was speaking at 3pm UK time today (26 August 2022).
In fact, the market was so focused on Jay Powell’s speech, it ignored much of the week’s economic data releases. For example, sales of new US homes fell in July to the slowest pace since January 2016, thanks to higher interest rates, while US durable goods orders were unchanged on the month, considerably weaker than both last month’s 2.2% increase and the 0.8% increase economists had expected.
Markets even ignored today’s PCE readings which clearly showed that US inflation is slowing! The PCE Core Deflator is the Fed’s preferred inflation measure, and not only did this decelerate to 4.6% in July, from 4.8% in June, but the month-on-month headline price inflation came in at -0.1%, which is its first negative reading since April 2020 (when the US economy was hit by coronavirus lockdowns and massive job losses).