Low US inflation only temporary claims Fischer, with Lockhart comments still to come

The biggest news in a fairly news-less afternoon, at least in terms of the indices, came from Stanley Fischer.

The vice chairman of the Federal Reserve stated that the current low inflation is largely temporary (due to its links to the commodity situation), positively noting that the US is near ‘full employment’. Like many comments out of the Fed recently, it appeared Fischer wanted to make sure he didn’t provide too clear a picture on where the Fed stands. However, whilst his comments seemed to contain the seeds of hawkishness, especially with his bullish view of the jobs sector, he claimed that the Fed still needed to see a return to ‘normal’ levels of inflation before a hike could happen. The US markets appeared to take a dovish view of Fischer’s comments, with the Dow Jones surging to 3 digit gains as it tries to recover from last week’s bearish trading.

Whilst Fischer’s close alignment to Yellen likely preventing him from saying anything too controversial, this Monday still has to see comments from Atlanta Fed Chairman Dennis Lockhart, someone who in the past has shown no hesitation in regards to his rate hike position. Talking to the Wall Street Journal last week Lockhart showed a clear preference for a September lift-off, stating that it would take a ‘significant deterioration in the economic picture’ to convince the Bank of Atlanta CEO that a rate hike next month wouldn’t be the right thing to do. His comments last week caused a charge by the dollar, so a similar sentiment this afternoon could cause the same reaction.

The FTSE managed to mitigate some of its more extreme losses this afternoon, with a rebound in the mining sector compensating for the remnants of limpness in its oil stocks. Vedanta, against the odds, was the day’s big winner, with the company lifted away from near 10 year lows following the news that iron ore mining was to resume at its Goa projects. Strength from copper helped Rio Tinto join in with the afternoon bump, allowing the FTSE to ease its losses as the day went on.

The positive US open helped the DAX and CAC regain some vigour as Monday continued, widening their gains after overcoming a lunchtime wobble. Despite comments suggesting a deal is nearly done, there has once again been little actual news from the Eurozone; with Tuesday tabled as a potential date for the conclusion of negotiations, however, that could all change tomorrow.