U.S. Equities Rise Led By Dovish Comments From Fed Vice Chair, Monetary Easing Expectations in China

rtU.S. equities are moving higher on Monday following comments on Monday from Fed Vice Chair Stanley Fischer about delaying an interest rate hike due to low inflation combined with growing expectations in China that their central bank will engage in further monetary easing to confront a slowdown in producer prices and exports.

Fed Vice Chair Stanley Fischer told Bloomberg TV this morning that the Fed is concerned about low inflation and won’t decide to act until inflation returns to more normal levels.

“The interesting situation in which we are is that employment has been rising pretty fast relative to previous performance and yet inflation is very low” Fischer said.

While acknowledging that the recent drop in oil prices and raw materials has led to an environment of low inflation, Fischer explained that he believes that these will stabilize at some point and said the data has to drive decisions.

According to the Bureau of Economic Analysis last week, Personal consumption expenditures (PCE) increased $25.9 billion, or 0.2 percent in June.

Real PCE or PCE adjusted to remove price changes, decreased less than 0.1 percent in June, in contrast to an increase of 0.4 percent in May.

The latest Core PCE index (excluding Food and Energy) is at 1.29 percent yoy.

Over the week-end it was reported that China’s producer prices fell to a 6 year low and their producer price index fell 5.4 percent in July from a year ago, fueling rising expectations that China’s central bank will need to add further monetary easing to help the Chinese economy.

Exports in July dropped 8.3 percent.

-Johnathan Schweitzer

 

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