The focus today would be on the FOMC minutes, which we kind of expect would be a touch on the hawkish side of things. Looking at the composition of the FOMC, the doves are in a minority, though Powell remains on the dovish side. The minutes are likely to reflect the views of some hawkish members of the committee and lay the groundwork for a potential tapering announcement in September. In the U.S markets, U.S. equity futures edged up as investors assessed the economic recovery and risks from the resurgent coronavirus. The S&P 500 lost 0.7% to close 4,448.08 for its biggest decline in four weeks amid signs the coronavirus is holding back the U.S. economy. The Dow Jones Industrial Average DJIA lost 0.8% to close 35,343.28 while the Nasdaq composite COMP dropped 0.9% to close at 14,656.18.
European stock markets are expected to open higher Wednesday, taking their lead from gains in Asia rather than the weak close seen on Wall Street, ahead of key inflation data and an update from the Federal Reserve. The DAX futures contract in Germany traded 0.4% higher, CAC 40 futures in France climbed 0.1%. Eurozone’s inflation rate for last month is expected later in the session and is expected to remain at 2.2% on the year.
The FTSE 100 futures contract in the U.K. rose 0.4%. Although confidence has been shaken by signs of slowing global growth, the ongoing Covid-19 pandemic and the political turmoil in Afghanistan, the focus is likely on the release of inflation data for July. U.K. consumer prices rose 2.0% year-on-year, sharply slowing from the 2.5% growth seen during the previous month and lessening the pressure on the Bank of England to tighten monetary policy. The CPI data was mixed with the CPI numbers lower than the consensus, but RPI surprising to the upside. For QE, the BoE would buy GBP1.147bn of 7Y-20Y maturity Gilts.
Oil prices edged higher Wednesday, attempting to rebound after four days of declines, but the spread of the delta coronavirus variant, particularly in China, and the associated impact on mobility is likely to cap any gains. Eyes will be on the latest crude oil supply data from the U.S. Energy Information Administration, which is due later in the day, after the American Petroleum Institute, an industry body, reported a draw of just over 1 million barrels for the week ending Aug. 13. The EIA reported earlier this week that U.S. shale oil production is expected to rise to 8.1 million barrels a day in September, the highest since April 2020. It’s currently just over 7.9 million barrels a day. The U.S. crude futures traded 0.2% higher at $66.50/bbl, while the Brent contract rose 0.3% to $69.20/bbl.
ZAMBIN dominates the news on the Sovereign side of SSA, following the landslide victory of the opposition in the presidential elections over the weekend. The president-elect, Hakainde Hichilema, is considered pro-business and is expected to steer away from the nationalist policies adopted by the exiting administration. The sovereign paper gained more than +5pts despite seeing some profit taking in the early session of trading (Monday) and still moved up further by the time U.S RM demand kicked in. It has continued to maintain a firm tone, although nowhere near the magnitude of Monday’s move.