Aug 1, 2018, by Lorcan Roche Kelly
At 2:00 p.m. Eastern Time today the Federal Reserve will announce its latest monetary policy decision, with the Federal Open Market Committee almost certain to hold rates unchanged. Today’s decision will not be followed by a press conference. Policy makers will probably be mulling whether their view that the stock market will remain healthy is correct, and President Donald Trump’s recent comments on the bank’s policy stance. Earlier today the Reserve Bank of India hiked its key rate to 6.5 percent.
After rumors about the restarting of trade talks yesterday, China and the U.S. got back to trading threats today. The Trump administration is considering more than doubling the tariffs on $200 billion in Chinese imports from 10 percent to 25 percent, according to people familiar with the deliberations. China responded by warning against “blackmailing and pressuring” by the U.S. to force it back to the negotiating table. Authorities in Beijing may be feeling the pinch from the tariffs as the country’s central bank is said to be actively encouraging banks to extend more credit as efforts to boost the cooling economy increase.
Another solid quarter for Apple Inc. pushed the company closer to a $1 trillion valuation as investors focus on strong iPhone demand and growth in services revenue. Shares in the company were trading at $197.10 in the pre-market, with $203.45 the level needed for a $1 trillion market cap. Tesla Inc. reports earnings today, with reports this morning saying the company is looking to raise funds in China to finance at least part of the cost of a $5 billion factory it is planning to build there. Analysts will tune in to the earnings call with interest to hear how Elon Musk will deal with the criticism his company has faced this quarter.
Overnight the MSCI Asia Pacific Index gained 0.4 percent while Japan’s Topix index closed 0.9 percent higher as strong earnings lifted technology stocks. In Europe, the Stoxx 600 Index was 0.3 percent lower at 5:50 a.m. as renewed fears over a trade war proved a drag on commodity stocks. S&P 500 futures pointed to a small loss at the open, the 10-year Treasury yield was at 2.980 percent and gold slipped.
There’s a lot of data to look for ahead of today’s Fed decision. ADP employment change is due at 8:15 a.m., with U.S. July manufacturing PMI due at 9:45 a.m. and ISM manufacturing at 10:00 a.m. At 10:30 a.m. the latest U.S. oil inventory report is due. Auto sales data for July will roll in across the morning, and the Treasury is set to reveal its quarterly borrowing plan which may move the U.S. yield curve.