Automaker stocks led the index higher on the back of better growth. The S&P 500 traded high for most of the day and closed 0.81% higher at 1653. The central bank’s Beige Book showed encouraging signs in consumer spending while manufacturing was modest. The higher interest rate is having an impact on several districts with slower lending activities.
This “modest to moderate” report card is tilting most to expect a dial down in purchases, and an expectation of a strong non-farm payrolls number. Yields on ten-year notes climbed up to 2.897, back to its two-year high as investors price this in.
G20 leaders leave for a two-day meeting in St. Petersburg to discuss interesting talking points such as Syria, the BOJ’s manipulation of the yen and the US scaling back its monetary stimulus. There’s been debate over whether the group is too large and whether anything substantial is expected from this meeting. The topic of limiting negative effects such as extreme volatility in the financial markets after excessive monetary stimulus will be on the cards.
Emerging markets have been hardest hit; the IMF’s latest report put a focus on the vulnerabilities of emerging economies, citing India and Indonesia amongst them, advising “policy makers should allow exchange rates to respond to changing fundamentals”. Eurozone growth concerns remain on the agenda with Finance Ministers from France, Italy and Germany pledging their priority is solving the high unemployment problem.
The BOJ, the ECB and Malaysia
The Bank of Japan, the European Central Bank, the Bank of England and Malaysia are releasing statements today. All are expected to keep rates unchanged. Recent economic activities in Japan have mostly been positive, allowing Japanese yields to remain low. GDP in the eurozone confirmed growth is slowly improving, which would suggest a rate cut by the ECB is unlikely, although President Mario Draghi is likely to repeat the pledge of keeping rates low and the possibility of a rate cut if necessary.
Malaysia’s central bank BNM has kept its policy rate at 3% since 2011, and there is no reason to expect any changes in today’s meeting. Malaysia’s GDP growth expanded 1.4% in Q2, beating the contraction of 0.4% in Q1.
Although overall growth remains affected by external factors, the central bank expects domestic demand and capital spending to offset the weakness and continue to support growth for the rest of the year.
The annual growth rate grew 4.3% in Q2, up from 4.1% in Q1 and analysts expect 4.8% in Q3.