[Tokyo 29th Archyde.com]-
After the speech by Chairman Jerome Powell of the Federal Reserve Board (FRB) at the economic symposium (Jackson Hole meeting) hosted by the Federal Reserve Bank of Kansas City, the reaction of the US stock market was hawkish. However, there were no particularly new remarks, and the impression was that the negative reaction to the stock price was prominent. The 10-year U.S. Treasury yield has barely moved, and federal funds rate futures don’t seem to be pricing in a sharper rate hike. The dollar/yen exchange rate was firm once morest expectations of higher interest rates, but the exchange rate remained at around 1 yen.
The stock market may have expected too much of a dovish stance. Stock prices have recently been somewhat speculative, and it seems that positions were unwound all at once on the pretext of the chairman’s speech. If the relevance and rationality of the chairman’s remarks are understood, the market will calm down.
He continued to take a stance of “depending on the data.” Stock prices are expected to be volatile while confirming the US employment statistics and consumer price index (CPI) toward the Federal Open Market Committee (FOMC) in September. It is unlikely that US stocks will renew their lows since the beginning of the year, but it is also unlikely that they will turn around and continue to rise.
The near-term Nikkei Stock Average is likely to move in the range of 27,500-29,000 yen. Besides being supportive of a weaker yen, Fed Chair Powell has reiterated that at some point it may be appropriate to slow down the pace of rate hikes as monetary policy stance tightens further, suggesting that the effects of rate hikes thus far may be expected this fall. If confirmed, it will likely support the downside of stock prices.
