USA stocks, bonds jump on go-slow fed; oil climbs - Standard

USA stocks, bonds jump on go-slow fed; oil climbs - Standard

USA stocks, bonds jump on go-slow fed; oil climbs - Standard

The Trump administration's goal to shortly achieve 3 percent GDP would be "challenging", Federal Reserve Chair Janet Yellen warned Congress on Thursday.

Inflation in the USA has softened in recent months, which triggers discussions about the pace and timing of the future rate hikes among Fed officials.

Market analysts now widely expected that the Fed would start to shrink its balance sheet as soon as in September.

Many economists believe the Fed, which has raised rates three times since December, will hike rates one more time this year.

Given that we're likely in for some extended volatility in the Dollar over the next couple of days around this Yellen testimony, traders will likely want to avoid trying to chase EUR/USD as the potential for whipsaw is very high. It does not bode well for those expecting U.S. fixed income to sell off aggressively from here and the U.S. 10-year treasury (by way of example) heading towards 3%. Yellen mentioned that the Committee tries not to provide an opinion here. Central banks around the world have been hinting that the accommodative policies in place for years may no longer be needed amid signs that the global economy is gaining traction.

She blames a recent slowdown in inflation on temporary factors. Of course, we can't forget earnings too and the market is clearly telling us that they expect the consensus of 7% Q2 EPS growth for the S&P 500 corporations to perhaps be closer to 9-10%.

Abu Dhabi-based Union National Bank on Wednesday said its second-quarter net profit rose nearly 7 percent, beating analysts' forecast.

The S&P 500 gained 17.72 points, or 0.73 percent, to 2,443.25 and the Nasdaq Composite added 67.87 points, or 1.10 percent, to 6,261.17. Japan should open a touch higher, despite an unconvincing move from USD/JPY, with the pair looking for buyers to really step in at ¥113.00. Since that mid-June reversal, USD/JPY has continued to see topside run as the Yen was one of the few currencies that was weaker than the U.S. Dollar.

"It seems like [Yellen's] dialing back a little bit of the hawkish sentiment from last time", said Karyn Cavanaugh, senior market strategist at Voya Financial.

See:Is Janet Yellen still calling the tune in financial markets?

Greater China markets traded sideways.

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