All eyes on Jay Powell: how restrictive and for how long? Markets are finely tuned to today’s remarks from Powell. But we should not be surprised if what he says is old hat, only underlining the inflation fight required still. And we should note the abandonment of forward guidance as such means it’s all about the data now so next week’s jobs report and subsequent inflation data is probably more important; to wit, watch today’s core PCE figures closely, forecast at +0.2%. So far, the robust jobs market is providing ample cover to keep raising rates. Of course, what he says has the potential to send markets in either direction. Powell is on the wires at 15:00 (BST). Whilst stocks are a tad firmer there is not a lot else going on this morning ahead of the even. 

Fed speakers are in full flow as the conference kicks off. Atlanta Fed’s Bostic sounded hawkish, ready to go for 75bps unless there is a big shift. “Some weakening is to be expected [in the economy],” he said, adding that “it’s going to be really important that we resist the temptation to be too reactionary, and really make sure that we get inflation well on its way to 2% before we take any steps to increase accommodation in our policy stance”. 

The Fed’s Harker also beat a pretty hawkish drum, saying ‘we need to get to a restrictive stance, which we will do by year-end”. He specified the Fed funds rate needs to get above 3.4% “and then maybe sit for a while but it depends on the data”. Markets agree and anticipate roughly 3.75% by December. 

Meanwhile ECB meeting minutes underscored the central bank’s commitment to keep raising rates. Weak euro was front and centre for policymakers: “Members widely noted that the depreciation of the euro constituted an important change in the external environment and implied greater inflationary pressures for the euro area.” 

Looks like it could go for another 50bps hike in September with the July move enjoying widespread support among policymakers. But the recession fears and a winter energy crisis will likely dissuade the ECB from going as aggressive as the Fed. A lot rests on wages and again it may be that the lack of follow-through from first round inflation pressures to second round effects like wage spirals will be reason enough for the ECB to take a slower, data-dependent approach. 

Stocks are on the up ahead of Powell’s anticipated remarks. European stock makers edged higher in early trade on Friday after Wall Street rallied for a second day. The FTSE 100 rose half a percent to above 7,500 and the DAX added 0.6% to 13,350. This came after the S&P 500 added 1.4%, running into resistance at 4,200 – futures tread mildly lower this morning with this level in focus.  

Put Powell to one side and we have to focus on seasonality as trading desks fill up again after the holidays. GS notes that “volume and liquidity will assuredly fade over the next ten days .. as those messy September seasonals come into view.” Buybacks are “set to taper over the course of the next month .. month-end rebalancing activity will likely draw out some selling of equities.” 

Meanwhile the US and China are close to agreeing a deal that would resolve a dispute over audit inspections that threatened to lead to mass de-listings of Chinese stocks from American exchanges. Shares in the likes of Baidu and JD.com traded higher in Hong Kong. A number of US-listed Chinese stocks rose on Tuesday on hopes of a breakthrough and it is being reported that Washington and Beijing are close to agreeing on terms that would allow US regulators access to audits of Chinese companies listed in the US.

And finally, Musk stuff: Remember the bots – it’s all about bots, right? Musk’s chief beef with Twitter is supposedly that there are too many bots and Twitter has not been open about it. There are, of course, two ways to see this. Ultimately, of course, it’s not about the bots as such, but whether Musk can prove that Twitter’s board has broken covenants in the takeover deal. Cue Delaware Chancery Court Judge  Kathaleen McCormick, who slammed Elon Musk for “absurdly broad” requests for “trillions upon trillions of data points.” 

Musk’s team wanted “all of the data Twitter might possibly store for each of the approximately 200 million accounts included in its mDAU count every day for nearly three years,” she wrote. Emphasis mine here, but this is great: “Plaintiff [Twitter] has difficulty quantifying the burden of responding to that request because no one in their right mind has ever tried to undertake such an effort. It suffices to say, Plaintiff has demonstrated that such a request is overly burdensome.”  

Instead of the plainly ridiculous 200m accounts, Twitter was ordered to hand over a subset – just 9,000 accounts reviewed in connection with Twitter’s Q4 2021 audit, as well as some additional documents. The judge also agreed to Twitter’s request for some documents from Musk relating to analysis he used to try end the deal.