Interest to Yellen fades as investors eye new Fed governor
The head of Federal Reserve Janet Yellen is doing everything to bring the energy of investors back on track. The Fed’s boss took advantage of the bankers meeting in Washington on Sunday to spread optimism, praising the economy and easing doubts about the delay in inflation.
According to Yellen, the current economic situation allows to expect a step-by step hiking process of the interest rates. Among other similar on-duty wordings, an interesting remark seemed to be about natural disasters, more specifically their impact on output in the third and fourth quarter. According to the forecast, the non-systemic deviation from the GDP trend will occur in the third quarter but in the fourth quarter the economy will already feel good.
Responding to the suggestive question of the stock market overpricing, Yellen assured that in the context of the rehabilitation of banking system after the crisis of 2007-2009, current prices may be fully justified. However, Trump's tax reform comments was a double-edge sword: on the one edge, the head of Federal Reserve suggested that it will be able to prop up the confidence of consumers and business, however, because of the large-scale monetary stimulus, which has cut rates extremely, reform is unlikely to stimulate consumption and investment decisions (yes, US economy is still close to liquidity trap). Nevertheless, the Fed, according to Yellen took a wait-and-see stance and will closely monitor the development of economic trends if the tax reduction plan is approved by the Congress.
The oil market
Prices for black gold jumped on Monday on interruptions in the supply of Iraqi oil, as troops of the government army entered the city of Kirkuk controlled by the Kurdistan, which caused a production decline of 200,000 barrels. The operation of the authorities was announced on Sunday in response to the September 25 referendum on independence in the separatist region.
Aggravations in the political arena also found the way out in the oil market. Donald Trump stated that he is not going to recognize Iran's compliance with the nuclear agreement, despite the fact that the international monitoring group confirms the absence of violations by Iran. During the period of the previous sanctions, Iranian supplies were reduced by 1 million barrels. Now that the country has acquired client base for their oil, sanctions are likely to do less harm, but potential reductions due to political frictions can be happily perceived by bulls in the oil market. The number of oil rigs decreased in the US last week, Baker Hughes reported. The divergence of drilling activity with rising prices is a very good signal for the market, as it indicates that the main threat to the market recovery is becoming less daunting.
The barrel of Brent was trading at 58.30 on Monday, plotting a march to the level of $ 60, which will greatly undermine the psychological protection of bears in the market.
Chinese production
The production prices in China increased by 6.9% in September compared to the same period of the previous year. Acceleration of inflation allows to expect that leading world banks will reduce the factor of Chinese economy as the main external risk preventing an increase in interest rates. Asian markets have updated the records following the positive news.
Arthur Idiatulin
According to Yellen, the current economic situation allows to expect a step-by step hiking process of the interest rates. Among other similar on-duty wordings, an interesting remark seemed to be about natural disasters, more specifically their impact on output in the third and fourth quarter. According to the forecast, the non-systemic deviation from the GDP trend will occur in the third quarter but in the fourth quarter the economy will already feel good.
Responding to the suggestive question of the stock market overpricing, Yellen assured that in the context of the rehabilitation of banking system after the crisis of 2007-2009, current prices may be fully justified. However, Trump's tax reform comments was a double-edge sword: on the one edge, the head of Federal Reserve suggested that it will be able to prop up the confidence of consumers and business, however, because of the large-scale monetary stimulus, which has cut rates extremely, reform is unlikely to stimulate consumption and investment decisions (yes, US economy is still close to liquidity trap). Nevertheless, the Fed, according to Yellen took a wait-and-see stance and will closely monitor the development of economic trends if the tax reduction plan is approved by the Congress.
The oil market
Prices for black gold jumped on Monday on interruptions in the supply of Iraqi oil, as troops of the government army entered the city of Kirkuk controlled by the Kurdistan, which caused a production decline of 200,000 barrels. The operation of the authorities was announced on Sunday in response to the September 25 referendum on independence in the separatist region.
Aggravations in the political arena also found the way out in the oil market. Donald Trump stated that he is not going to recognize Iran's compliance with the nuclear agreement, despite the fact that the international monitoring group confirms the absence of violations by Iran. During the period of the previous sanctions, Iranian supplies were reduced by 1 million barrels. Now that the country has acquired client base for their oil, sanctions are likely to do less harm, but potential reductions due to political frictions can be happily perceived by bulls in the oil market. The number of oil rigs decreased in the US last week, Baker Hughes reported. The divergence of drilling activity with rising prices is a very good signal for the market, as it indicates that the main threat to the market recovery is becoming less daunting.
The barrel of Brent was trading at 58.30 on Monday, plotting a march to the level of $ 60, which will greatly undermine the psychological protection of bears in the market.
Chinese production
The production prices in China increased by 6.9% in September compared to the same period of the previous year. Acceleration of inflation allows to expect that leading world banks will reduce the factor of Chinese economy as the main external risk preventing an increase in interest rates. Asian markets have updated the records following the positive news.
Arthur Idiatulin
This analysis is provided as general market commentary and does not constitute investment advice. Past performance is not indicative of future results
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