Fed Minutes, PBoC and Energy Security in Focus

Fed Minutes Update

Yesterday’s publication of the Fed minutes indicated that they would need to keep interest rates at restrictive levels “for some time”?as inflation hovers around 40-year highs, though the pace of rate hikes could slow. These hawkish tones involved the Fed suggesting that even at the point at which inflation starts to come down, they would still hold interest rates at relatively high levels to ensure that it would fall back to their 2% target. The minutes also note that the “bulk” effect of the interest rate hikes have not filtered into the economy and hence high inflation would continue to persist for some time to come. Indeed, it stated that "Participants agreed that there was little evidence to date that inflation pressures were subsiding." Markets are still weighing on whether the Fed will conduct a third consecutive 75bpt rate hike at their next meeting on 21st?September as the world’s largest economy witness’s inflation at 8.5%, a base interest rate of 2.5% and a labour market with 3.5% unemployment and 1.8 jobs per unemployed person in the US.

PBoC Look to further loosen Monetary Policy?

Reuters are reporting that according to policy insiders at the People’s Bank of China will further loosen their monetary policy in an effort to stimulate economic activity. On Monday, The Peoples Bank of China cut the medium-term lending rate by 10bpts to 2.75% in a move which was unexpected by the markets. This comes as Covid cases have started to rise again in China and the CCP are having considerable internal conflict over the most appropriate course of action vis-à-vis lockdowns and Xi Jinping’s zero-covid policies. Retail sales and industrial production data also came in lower than expected as investors and analysts are continuing to pay close attention to the implications of China’s economic downturn. Indeed, China’s Q2 GDP print indicated that it was only marginally above a contraction as lockdowns happened production – particularly in Shanghai. Hence, the PBoC have hoped that losing their monetary policy will stimulate growth and alleviate some of the downward pressure on their economy which continues to concern investors as they weigh in on the prospect of a property market crash.

TTF Futures Surge Above €231-per-megawatt-hour

TTF futures are currently trading over €231-per-megawatt-hour mark, having risen from under €210-per-megawatt-hour at the start of Monday’s session. This comes as Gazprom are currently sending gas from Russia to Europe at just 20% capacity through Nord Steam 1 – which accounts for 40% of all natural gas exports from Russia to Europe. This led EU policy makers to commit to reducing usage by 15% as they try to fill natural gas storage to 80% capacity before the onset of winter. The curtailment in supply has prompted the EU to look at increasing LNG imports from places including Qatar and the US, which has in turn seen a global rush to secure longer term contracts, adding further inflationary pressure on the global market.?

TTF futures are currently trading up at around 464% on last year and 47.5% on the month, having risen around 0.9% during the last 24-hour session.

Equities Update

Further pressures are on equities this morning following yesterday’s publication of the Fed minutes. The FTSE 100 trading down by around 0.2% today, while the S&P 500 ended yesterday 0.7% lower.??Meanwhile the tech heavy Nasdaq lost 1.3% over the course of yesterday’s session, thus muting some of the lost ground it has recaptured in more recent sessions.

Chaney Loses Seat in Win for Trump Faction

Liz Chaney has lost her Wyoming seat in the House of Representatives to Donald Trump endorsed candidate Harriet Hageman. This comes after Chaney has been subject to significant pressure from the Trumpian faction within the Republican party after she heavily criticised the former president for his involvement in the 6th?January storming of the Capitol. Many political commentators are suggesting that this is indicative of the prevalence of the Trumpian grip within the party. Though, pundits are also speculating on whether Chaney may try to form her own movement of sorts and continue to condemn Trump and his supporters within the GOP.???