The effects of the financial crisis are posing new challenges for the U.S. economy. Top officials are trying to shift the focus from the timing of the first interest rate hike to the general trend of tightening that will come with it.
Treasuries and Eurodollars are higher in overnight trade, in sympathy with the lower than expected factory orders report out of Germany and falling yields there. U.S. domestic rate movement is quite modest thus far, recovering little of the two session decline following Friday’s sharp post-employment report advance.
U.S. stocks were set to open little changed on Wednesday, with traders eyeing a $70 billion mega-deal in the energy space and ahead of minutes from the most recent meeting of the Federal Reserve's policy-setting committee.
With the U.S. economy still years away from rising to normal levels of inflation and employment, the Federal Reserve can afford to wait until well into next year to raise interest rates, a top Fed official said on Tuesday.
European banks are still out on holiday today, but most major markets are open and today’s reaction to Friday’s disappointing U.S. jobs report shows that the market is pricing in a lower probability of a Federal Reserve rate hike in Q3.
Things will all be much more relevant after better U.S. equities trading today clarifies the extent of a failure that left them challenging key lower support. Much below the levels seen Friday there might be more extensive weakness back into January’s trading range along with further strength of the govvies and U.S. dollar weakness.