· The U.S. dollar edged higher on Wednesday as investors digested testimonies from the lead U.S. trade negotiator with China and the top ranking Federal Reserve official.
The dollar index against a basket of six major currencies was up 0.16 percent at 96.15.
· Fed Chair Jerome Powell finished his second day of testimony on Wednesday in front of the House Financial Services Committee. In his previous day's testimony before the Senate Committee on Banking, Housing, and Urban Affairs, Powell warned that problems abroad could impact the U.S.; however, he described the economy as "healthy" and said the outlook is "favorable."
· U.S. Trade Representative Robert Lighthizer also spoke Wednesday, hinting to the House Ways and Means Committee that a trade deal was not yet certain because China needs to do more than just purchase more U.S. goods.
"If we can complete this effort — and again, I say' if' — and can reach a satisfactory solution to the all-important and outstanding issue of enforceability, as well as some other concerns, we might be able to have agreement that does turn the corner in our economic relationship," Lighthizer said.
· Earlier, the yen and the Swiss franc strengthened after Pakistan shot down two Indian jets, sending investors out of riskier markets into safer havens.
· The Japanese currency rose to a one-week high of 110.67 per dollar after Pakistan downed the jets a day after Indian warplanes struck inside Pakistan for the first time since a war in 1971.
"So far market reaction in major currencies has been relatively limited as tensions between the two countries had already been high. Focus is on whether the conflict shows signs of escalating," said Kyosuke Suzuki, director at Societe Generale in Tokyo.
· U.S. government debt yields rose on Wednesday amid Federal Reserve Chairman Jerome Powell's second day of testimony on Capitol Hill.
At 11:40 a.m. ET, the yield on the benchmark 10-year Treasury note was up 5 basis points at 2.682 percent, while the yield on the 30-year Treasury bond was up 5 basis points at 3.06 percent. The 10-year yield hit a fresh high of session of 2.684 percent, its highest level since Feb. 25.
· The Federal Reserve will stop shrinking its $4 trillion balance sheet later this year, Fed Chairman Jerome Powell said on Wednesday, ending a process that investors say works at cross-purposes with the Fed’s current pause on interest-rate hikes.
“We going to be in a position ... to stop runoff later this year,” he said, adding that doing so would leave the balance sheet at about 16 percent or 17 percent of GDP, up from about 6 percent before the financial crisis about a decade ago.
The U.S. GDP is currently about $20 trillion, suggesting the Fed’s balance sheet would be between $3.2 trillion and $3.4 trillion.
· A widening trade gap, a more sluggish consumer and softer business spending bit into fourth quarter growth, and economists now expect that the economy grew at about 2.3 percent in the final quarter of 2018.
Fourth quarter GDP is released Thursday at 8:30 a.m. ET.
Economists were encouraged by a sharp rebound in February consumer confidence Tuesday, suggesting that the consumer may be now looking past the shutdown and the stock market sell off in December.
· A senior Chinese diplomat expressed “deep concern” over the escalation of tensions between India and Pakistan on Wednesday, after the two countries said they shot down each other’s fighter jets.
State Councillor Wang Yi, the Chinese government’s top diplomat made the comments in a telephone conversation with Pakistani Foreign Minister Shah Mahmood Qureshi, China’s foreign ministry said in a statement on its website on Thursday.
India and Pakistan both said they shot down each other’s fighter jets on Wednesday, with Pakistan capturing an Indian pilot a day after Indian warplanes struck inside Pakistan for the first time since a 1971 war, prompting world powers to urge restraint.
It is the first time in history that two nuclear-armed powers have launched air strikes against each other, while ground forces have exchanged fire in more than a dozen locations.
· Long-standing tensions between nuclear powers India and Pakistan escalated this week after each country said it carried out airstrikes against the other, prompting concerns over the potential outbreak of a war in South Asia.
U.S. Secretary of State Mike Pompeo urged both countries on Tuesday to "exercise restraint" and avoid an "escalation." France, Australia and China, which is a close ally of Islamabad and a major investor in the country, also called for restraint.
While the countries have had a contentious relationship since 1947, this week's escalation reached heights not seen in recent years.
· U.S. President Donald Trump and North Korean leader Kim Jong Un will hold another day of talks at their second summit in eight months on Thursday, after swapping compliments at a dinner but giving no sign of progress on the key issue of denuclearization.
“Great meetings” and a “Very good dialogue,” Trump said on Twitter after dinner with Kim at the French-colonial-era Metropole hotel while the White House said the two planned to sign a “joint agreement” after further talks on Thursday.
The White House has given no indication of what the signing ceremony might involve, although the two sides’ discussions have included the possibility of a political statement to declare the 1950-53 Korean War over, which some critics see as premature.
· Oil prices surged more than 2 percent on Wednesday after government data showed an unexpected and sharp drop in U.S. crude stockpiles.
Prices were already higher after Saudi Arabia's influential energy minister brushed aside pressure from President Donald Trump to tread carefully as OPEC and its allies cut output.
U.S. commercial crude stockpiles fell by 8.6 million barrels in the week through Feb. 22, the U.S. Energy Information Administration reported. That was more than twice the drop of 4.2 million barrels reported by the American Petroleum Institute on Tuesday. It also confounded the forecasts in a Reuters survey for a rise of 2.8 million barrels.
Meanwhile, U.S. gasoline stocks fell by by 1.9 million barrels, while inventories of distillate fuels like diesel ticked down by about 300,000 barrels.
U.S. West Texas Intermediate (WTI) crude futures jumped $1.44, or 2.6 percent, settling Wednesday's session at $56.94 a barrel. International Brent crude futures rose $1.19, or 1.8 percent on the day, at $66.40 a barrel around 2:25 p.m. ET.
Reference: CNBC
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