In a night of two halves European markets slumbered until US Federal Reserve chair Jerome Powell delivered a boost to confidence with a dovish speech to the Economic Club of New York. The US dollar fell and shares soared as the Fed chair reversed comments from October and suggested US rates were closer to neutral levels. Industrial commodities rallied, with the exception of oil. Bonds sat pat as interest rate traders were already betting against the Fed’s previously more hawkish stance.

Asia Pacific investors are set for a day in the sun. However the cloud of trade tensions may quickly reappear at the kick off of the G-20 meeting tomorrow. No news could be bad news for markets ahead of the already mandated lift in US tariff rates on January 1. This may explain the muted response of Asia Pacific futures markets to the US exuberance. Ironically it was the growth sensitive IT, consumer discretionary and industrial sectors that led the markets higher.

Oil inventory data sounded a warning, showing a surprise build in inventory despite flat production, raising concerns about industrial demand. US wholesale inventory data also showed an unexpected build.

Investors have much to consider over the next twelve hours. Japanese retail sales, Australian capex, French GDP, and German and US inflation data could all change the course of trading. The Fed’s preferred measure of inflation, the PCE, is forecast to show an annual rate of 2.1% tonight. Any deviance will speak directly to the sentiment that drove the overnight action.

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