FRB Chair Yellen’s semiannual congressional testimony was a nonevent, offering a subtle change to her outlook from less than a week ago, pushing the prospect of additional interest rate increases further into the future. Yellen stated the central bank were on watch for whether, rather than when, the economy would show clear signs of improvement, acknowledging the possibility that growth could be slow to pick up.
Yellen echoed the familiar remarks that she is optimistic about the future and warned all not to over react to one or two reports, a direct inference to Ma’s weak labor report.
In her prepared comments, she referenced tomorrow’s Brexit vote and uncertainty over China’s expansion.
In other words and as mentioned above, no new ground was broken.
Markets were essentially unchanged on light volume, the result of Thursday’s Brexit vote, which polls suggest is still close to call but momentum is growing for the “remain” side. Currently the odds are about 26% England will leave the EU.
Oil shares were yesterday’s market leader as oil equities rallied for the third consecutive day the longest advance in two month even as crude prices dropped.
Treasuries were nominally lower as the flight to quality bid continued to erode, falling for the fourth the consecutive day, the longest decline since April. Moreover, a gauge of demand fell to the lowest since 2009 at the auction of the five year notes.
Last night the foreign markets were up. London was up 0.64%, Paris up 0.67% and Frankfurt up 1.03%. China was up 0.94%, Japan down 0.64% and Hang Sang up 0.89%.
The Dow should open nominally higher as the odds are only one in four England will leave the EU. Oil is again over $50 barrel on an inventory drawdown greater than expected. The 10-year is unchanged at a 1.70% yield.