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- Asian stocks tiptoed higher on Thursday and the dollar consolidated recent gains after the U.S. Federal Reserve painted a relatively bright picture of the economy, but a deepening sell-off in commodities kept gains in check. Gains were muted before the earnings season kicks off at full throttle next week, when companies are broadly expected to post disappointing results on the back of weak economic data in recent months, particularly for trade. Gavekal strategists noted that Asia’s trade performance had been disappointing in recent months. After a two-year post-crisis rebound in 2010-2011, export growth in the region has slowed to an annual average of 7.5 percent in U.S. dollar terms and 6 percent in volume terms this year compared to U.S. dollar growth rates of 30 percent in the years before the crisis.
- The Fed on Wednesday described the economy as expanding “moderately” while upgrading its view of the labor market and saying housing had shown “additional” improvement. The Fed’s assessment left the door open for a possible hike in interest rates in September, which would be the first rise since 2006. U.S. economic growth likely accelerated in the second quarter as a pick-up in consumer spending and housing offset the drag from trade and the energy sector, suggesting a steady momentum that could bring the Federal Reserve closer to hiking interest rates this year. The government is expected to report on Thursday that gross domestic product increased at a 2.6 percent annual rate, according to a Reuters survey of economists. This means first-quarter GDP, previously reported to have shrunk at a 0.2 percent pace, could be revised higher because of new source data. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, is forecast to have grown around a 2.9 percent rate from a 2.1 percent pace in the first quarter.
- The U.S. economy and job market continue to strengthen, the Federal Reserve said on Wednesday, leaving the door open for a possible interest rate hike when central bank policymakers next meet in September. Following their latest two-day policy meeting, Fed officials said they felt the economy had overcome a first-quarter slowdown and was “expanding moderately” despite a downturn in the energy sector and headwinds from overseas. “On balance, a range of labor market indicators suggest that underutilization of labor resources has diminished since early this year,” the Fed said in a policy statement that kept rates unchanged. That language and other small changes in the statement mark an upgrade in the central bank’s view of labor conditions since its last policy meeting in June, when it said labor slack had “diminished somewhat.” Although the Fed may have ramped up expectations of a rate hike in September, it didn’t give a clear signal of its plans. Besides the additional improvement on the labor front, it said it also needed to be more confident that low inflation will rise to the 2 percent medium-term target.
- Oil prices extended gains in Asian trade on Thursday, after a larger than expected draw in U.S. crude and gasoline stocks strengthened the outlook for oil demand. But gains were capped by a stronger dollar and despite the drop in oil stocks some commentators warn of a global supply glut, with OPEC members producing 3 million bpd more than demand in the second quarter. U.S. crude stockpiles fell by 4.2 million barrels in the week to July 24, more than twenty times analysts’ expectations of a decrease of 184,000 barrels, EIA data showed. Gasoline stocks dropped by 363,000 barrels against analysts’ forecasts of a 512,000-barrel gain with U.S. gasoline demand up 6.2 percent from a year ago.