Morning all.. The FOMC minutes confirmed the doubts regarding a hike this year and were deemed rather dovish again. This has sparked a rally in stocks and seen the dollar fall. S&P closed up 0.88% and Asia followed with the Nikkei up over 1.5%. G10 commodity currencies continued to outperform, with AUD up 0.7% to 0.7290, and NZD up 0.5% to 0.6685. USDCAD fell 0.4% to 1.2960. EUR and JPY were little changed at 1.128 and 120.0 respectively. The 10y UST yield fell 2bps to 2.086%, paring overnight gains and oil rallied again along with other commodities. China is undergoing an “enormous” economic and financial transformation that, while anticipated by Chinese policy makers, will still create some turbulence for the global economy, IMF Managing Director Christine Lagarde said. “China is moving, and predictably so, from an investment-driven model to a more consumption-driven model, and this is a choice, this is deliberate,” Lagarde said in an interview at the IMF’s annual meeting. “It will not be without bumps on the road, but it’s a good evolution and it’s legitimate at that stage of development.”
With regards to the Fed minutes minutes, in particular it was the text stating that ‘recent global economic and financial developments had imparted some restraint to the economic outlook and placed further downward pressure on inflation in the near term’ which grabbed most of the attention. Committee members also noted that compared with their previous forecasts, more officials now saw the risks to inflation as tilted to the downside. Meanwhile, while there were the usual supportive comments around the state of the labour market, there was also mention of the strengthening dollar and possible effects of slower economic growth in China and emerging markets as restraining economic activity. The market seems to be convinced that a dovish Fed means stocks will rise still even though rates are low due to lack of growth and no inflation.
Not much on the data front this morning with French IP and manufacturing production, Norway CPI and the UK trade balance. Good luck.