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Economic growth slowed, US stocks higher


US stocks advanced higher on Wednesday, climbing the most in about a month as the global bond market selloff takes a break. The equity market witnessed fresh upside strength after the release of the minutes from the Federal Reserve (Fed) Beige Book, which showed that price growth has slowed in 9 of the 12 districts and also indicated that economic activity was unchanged but the outlook for future economic growth remained generally weak. Investors tend to wait for the September 13th inflation report as the economic momentum could only improve if inflation continues to soften.

In the Eurozone, the European Central Bank will announce its monetary policy decision on Thursday, which is widely anticipated to hike rates by 50 bps but the focus will be on whether European policymakers are willing to put growth behind taming inflation or not. Skyrocketing prices in the Eurozone are taking their toll on households and businesses and pushing high inflation up amid the European energy crisis.

The benchmarks, S&P 500 and Dow Jones Industrial Average both staged a goodish rebound on Wednesday as the improving market sentiment and the retreating US dollar provided support to the equity markets. The S&P 500 was up 1.8% on a daily basis and the Dow Jones Industrial Average also advanced with a 1.4% gain for the day. Ten out of eleven sectors stayed in positive territory as the Utilities and the Consumer Discretionary sectors are the best performings among all groups, rising 3.14% and 3.08%, respectively. The Nasdaq 100 meanwhile climbed the most with a 2.1% gain on Wednesday and the MSCI World index was up 1.1% for the day.

Main Pairs Movement

The US dollar suffered daily losses on Wednesday, failing to extend its previous rally and retreated towards the 109.5 area during the American session amid a slightly risk-on impulse across the board. The Fed Beige Book also reported that some firms see some easing in labour shortages and price pressures. As for now, Investors expect a hawkish commentary from Fed Powell on interest rates as price pressures are still high.

GBP/USD was little changed on Wednesday as the cable remained under pressure near March 2020 low amid the less-hawkish Bank of England. On the UK front, the BoE policymakers failed to reinforce bets for a 75 bps September rate hike during the Monetary Policy Report Hearings. Meanwhile, EUR/USD advanced sharply and extended the intra-day rally towards the 1.000 area ahead of the ECB’s rate decision. The pair was up almost 1.05% for the day.

Gold surged with a 0.95% gain for the day after touching a daily high above the $1,718 mark during the US trading session, as the yellow metal marked the biggest daily gains in over a week amid a pullback from the 20-year high witnessed in the US dollar. Meanwhile, WTI Oil continued to suffer heavy losses and refreshed its daily low below the $82 mark in the late US trading session, as the speculation about easing Chinese demand following tepid local data kept weighing on the oil price.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
JPYGDP (Q2)07:500.7%
EURDeposit Facility Rate (Sep)20:150.5%
EURECB Monetary Policy Statement20:15
USDInitial Jobless Claims20:30240K
EURECB Press Conference20:45
USDFed Chair Powell speaks21:10
EURECB President Lagarde Speaks22:15
USDCrude Oil Inventories23:00-0.733M