Vaccine related investor optimism faded in overnight trading. A warning from Federal Reserve chairman Powell and disappointing US retail sales figures brought support for bonds and the Japanese yen as risk exposures fell. Tech shares did slightly better, suggesting rising infection rates figured in market thinking.
Jerome Powell cautioned that the US economy still has “a long way to go” in a speech in San Francisco. He called on Washington to enact a new fiscal stimulus package, pointing out the government can provide the income support that the Fed cannot. He highlighted increasing numbers of Covid cases, pointing out “the concern is that people will lose confidence in efforts to control the pandemic”.
US retail sales in October disappointed. Analyst were looking for a lift of around 0.5% at both headline and core levels. Instead, most measures were barely higher at around 0.1%. Weaker than forecast capacity utilisation and faster growth in inventories rounded out a sombre economic snapshot.
Japanese trade data and Australian wages growth numbers are due this morning. Modest expectations could mean a positive surprise is more likely. Regional currencies are steady, and futures indicate a mixed start to share trading, with modest gains in Japan and Australia offset by a small fall in Hong Kong.