U.S. Markets Flat Amidst Uncertainty of Rate Hike

With little meaningful economic data to be released, US markets remained directionless for the majority of the day as investors awaited the release of minutes from the FOMC’s July meeting.  Adding to the anticipation, both NY Fed President William Dudley and Atlanta Fed President Dennis Lockhart delivered hawkish statements yesterday supporting the appropriateness of a rate hike before year end.  The underlying theme behind most economists’ views is that any increase in benchmark rates will require further positive economic evidence before the next move.  The U.S. dollar responded by appreciating against most major currencies, reversing a three-day decline.  Stocks are mixed following the corporate earnings releases of Target and Lowe’s, where each fell short of estimates and pushed both share prices down more than 5%.        
 
Oil also fluctuated throughout the day after receiving varied updates regarding supply.  Reports stating that Saudi Arabia could increase production to record highs during the month of August sent crude prices down, but were partially offset by U.S. crude inventory numbers falling for the first time in four weeks.  Figures published today displayed a drop in U.S. crude stockpiles by 2.5mm barrels last week, significantly off analyst expectations of a 522k rise.  Overall, mixed stances on production going forward have led to crude futures reporting record levels of both long and short positions.

For the second day in a row, Britain released fresh post-Brexit data, announcing a decrease in jobless claims by 8,600 in July, where economists had predicted a gain of 9,000.  In addition, UK unemployment remained at its lowest levels since May 2005, standing at 4.9% for Q2.  The British Pound briefly rallied following the unexpectedly positive news, but settled down shortly thereafter as investors remained bearish on the currency amidst political uncertainty and the expectation of future layoffs in the medium term looking forward.  In Asia, China announced plans to open a stock trading link that will provide global investors the opportunity to invest in stocks listed on the Shenzhen Stock Exchange.
 
All three major US stock indexes are trading close to unchanged, while Treasury yields and swap rates are down 1-4bp across the curve with the 10 year Treasury hovering around 1.55%.  WTI crude oil is slightly down to $46.40 per barrel while Brent crude has gained minimally to $49.50 per barrel.