I know the sun shining when I close my eyes

Stock markets continue to take a breather ahead of tonight’s much-anticipated Powell Jackson Hole speech. The minutes of the Federal Reserve’s last meeting were released on Wednesday. They reflected the divisions among the Federal Reserve voting members on the next move for US interest rates. Those members who focused on inflation and the potential impact of Trump’s tariffs on prices in the future were those in favour of maintaining the status quo.  Those more focused on the potentially weakening employment market were more likely to favour a 25 basis point cut. All seemed to agree that there was a risk that prices would remain elevated and the employment data would continue to weaken. Market speculators still favour a cut in September, although those odds may change after tonight’s speech.

According to the August Flash Purchasing Manager Surveys, compiled by S&P Global Market Intelligence, major developed economies continue to show resilience despite geopolitical uncertainty. Even the UK appeared to report faster growth. Commenting on the monthly PMIs, at 53.6, up from 53.3 in July, the flash PMI output index for the ‘G4’ major developed economies (the US, eurozone, Japan and the UK) signalled that the pace of expansion has accelerated continually since hitting a 16-month low back in April.

The US data appeared particularly strong, suggesting that monetary policy is not too restrictive. Weakest remains the Eurozone. Consensus, for what it’s worth, is that there will be no more rate cuts this year in the UK. So where is the not-so-good news? According to S&P Global, the report also highlighted that average prices charged for goods and services in the US rose in August at the steepest rate for three years. Put that together, and it’s probably fair to say that without the unusual amount of influence coming from the White House, the Fed would remain in favour of leaving rates where they are for the rest of the year.

Monday is a Bank Holiday in the UK as parents prepare to send their children back to school at the beginning of a new school year. Yesterday, the GCE results were released. The statistic that caught my eye was the percentage of students failing to receive 4/Cs or above on Maths and English at the highest point since 2016, around 40% for both.

Powell’s speech is due to take place at 3 pm our time; markets in Europe and the US will be open. We shall see if he continues to signal a reluctance to cut rates, and depending on his reasoning, investors will probably take their lead from the bond market’s reaction.