TradeTheNews.com Weekly Market Update: Global Central Banks Mull Tighter Policy as Fed Hikes Again
Fri, 17 Mar 2017 16:17 PM EST
While German Chancellor Merkel and President Trump met at the White House to discuss their differences, the stock market continued to post gains on Friday, and closed up on the week. Major indices had faltered when the week began, as investors keep looking for promised fiscal policy implementation to buy at higher prices. While most economic data this week was strong and better than expected, that alone was not enough to send equities to new highs. For the week the DJIA gained 0.1%, the S&P rose 0.2%, and the Nasdaq added 0.7%.
Wednesday's FOMC meeting statement sent stock markets rallying again as the Fed framed a 25 basis point hike as a vote of confidence in the economy and reiterated it would raise rates gradually. The committee noted inflation is near the 2% target, but that it may also be willing to let inflation exceed that level for a while. Signals from Chair Yellen that interest rate normalization wouldn't happen faster than the economy could handle reassured buyers, as the market took on more risk, sending all major indices higher for the day. Those perceived reassurances on the speed of hikes didn't help bond prices, however, as fixed-income products sold off after the statement, reversing their rise from the beginning of the week.
Various central banks held monetary policy meetings on Thursday, and all three banks kept rates on hold. Japan, Switzerland and the UK kept their monetary policy unchanged, with no surprises from the first two central banks. Analysts, however, debated how long major developed economies such as Switzerland, Japan or the EU could keep current accommodating rates. ECB official Nowotny said that monetary policy in the EU is not like the US and that interest rates could rise before the end of the QE program (though no decision on this policy has been made yet). The BOE policy meeting kept the Asset Purchase Target in place with a unanimous vote, but on the question of rates Forbes dissented in favor of a rate hike. With the Brexit about to be triggered, higher rates for the UK are still seen as on hold, but that may change soon if economic data stays strong.
In corporate news this week, Intel announced it would acquire Mobileye for $15.3B in cash, as the chipmaker makes a move into the computer vision and machine learning space for autonomous vehicles, a sector it sees as a $70B market opportunity by 2030. Valeant shares were hit Monday on news Bill Ackman’s Pershing Square was liquidating its stake, with Ackman noting that he didn't realize how bad the Valeant situation was until he joined the board. Airline names ended the week slightly lower after some soft Q1 commentary from Southwest and a snowstorm which ravaged the Northeast led to over 1,500 flight cancellations. Amgen dragged down the biotech sector on Friday when study results showed its Repatha cholesterol treatment reduced heart attack risk, but perhaps not by enough to justify the price tag of the drug.
MONDAY 3/13
(UK) Scottish First Min Sturgeon (SNP): Confirms will seek authority for another independence referendum between autumn 2018 and spring 2019 period to give Scotland the opportunity to follow the UK out of the EU - speech from Edinburgh
(US) CBO scores American Health Care Act (AHCA): 14M more people would be uninsured in 2018 and 24M more by 2026
(CN) CHINA JAN-FEB FIXED ASSETS EX RURAL YTD Y/Y: 8.9% V 8.3%E (8-month high)
(CN) CHINA JAN-FEB INDUSTRIAL PRODUCTION Y/Y: 6.3% V 6.2%E (6-month high)
(CN) CHINA JAN-FEB RETAIL SALES Y/Y: 9.5% V 10.6%E (multi-year low)
MBLY Confirms to be acquired by Intel for $63.54/shr in cash valued at $15.3B; To be accretive to Intel EPS immediately
03/13 VRX Pershing Square sold its entire 27.2M share stake at $11.00/shr and Ackman to leave the board - CNBC
TUESDAY 3/14
(DE) GERMANY MAR ZEW CURRENT SITUATION SURVEY: 77.3 V 78.0E; EXPECTATIONS SURVEY: 12.8 V 13.0E
OPEC Monthly Report: raises 2017 global oil demand growth from 1.19M bpd to 1.26M bpd; boosts non OPEC supply growth forecast
(US) FEB PPI FINAL DEMAND M/M: 0.3% V 0.1%E; Y/Y: 2.2% V 1.9%E
WEDNESDAY 4/15
BAS.DE Raises prices globally for antioxidants & light stabilizers by 10% (majority of products); effective today
(CN) China Feb YTD Fiscal Balance at CNY660B (surplus)
(UK) JAN ILO UNEMPLOYMENT RATE 3M/3M: 4.7% V 4.8%E
(UK) FEB JOBLESS CLAIMS CHANGE: -11.3K V -41.2K PRIOR; CLAIMANT COUNT RATE: 2.1% V 2.2% PRIOR
(UK) JAN AVERAGE WEEKLY EARNINGS 3M/Y: 2.2% V 2.4%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 2.3% V 2.5%E
(US) FEB ADVANCE RETAIL SALES M/M: 0.1% V 0.1%E; RETAIL SALES EX AUTO M/M: 0.2% V 0.1%E
(US) MAR EMPIRE MANUFACTURING: 16.4 V 15.0E
(US) FEB CPI M/M: 0.1% V 0.0%E; CPI EX FOOD AND ENERGY M/M: 0.2% V 0.2%E; CPI INDEX NSA: 243.603 V 243.416E
(US) MAR NAHB HOUSING MARKET INDEX: 71 V 65E (highest since June 2005)
(US) Atlanta Fed cuts Q1 GDP forecast to 0.9% from 1.2% on 3/8
(US) Association of American Railroads weekly rail traffic report for week ending March 11th: 510.6K carloads and intermodal units, +4.4% y/y (ninth straight week of gains)
(US) FOMC RAISES FED FUNDS TARGET RANGE 25BPS TO 0.75-1.00% (AS EXPECTED); EXPECTS ECONOMIC CONDITIONS WILL EVOLVE IN WAY THAT WARRANTS GRADUAL INCREASES
(US) FOMC UPDATED ECONOMIC FORECAST FOR MARCH MEETING (DEC)
(US) Fed Chair Yellen: rate decision was based on economy's continued progress toward reaching our two mandates - post rate decision conf
(US) President Trump: will do something about rising CAFE standards for autos; US auto industry has been hurt, but won't be hurting for long - press
(US) Fed Chair Yellen: Fed wants confidence in economy before starting to shrink balance sheet; the term "well under way" is more qualitative than quantitative - Q&A
(US) JAN TOTAL NET TIC FLOWS: +$110.4B V -$42.8B PRIOR; NET LONG-TERM TIC FLOWS: +$6.3B V -$12.9B PRIOR
ORCL Reports Q3 $0.69 v $0.62e, R$9.21B v $9.24Be; Raises dividend 27% to $0.19/shr (implied yield 1.8%)
(NL) Netherlands election results (1st exit poll): PM Rutte's VVD party wins the most seats with 31 out of 150 in the lower house; Wilders' PVV wins 19 seats - Ipsos
(AU) AUSTRALIA FEB EMPLOYMENT CHANGE: -6.4K (first decline in 5 months) V +16.0KE; UNEMPLOYMENT RATE: 5.9% (13-month high) V 5.7%E
(CN) PBOC to inject combined CNY80B v CNY60B prior in 7-day,14-day, and 28-day reverse repos; raises all offer yields by 10bps
(CN) PBoC conducts total of CNY303B in 6-month and 1-yr Medium-term Lending Facility (MLF) operations; again raises rates by another 10bps
(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED; Maintains 10-yr JGB yield target around 0%; Cuts assessment of Housing sector
THURSDAY 3/16
(CH) SWISS NATIONAL BANK (SNB) LEAVES SIGHT DEPOSIT INTEREST RATE UNCHANGED AT -0.75%; AS EXPECTED
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.50%; AS EXPECTED
(EU) EURO ZONE FEB CPI M/M: 0.4% V 0.4%E; Y/Y (FINAL READING): 2.0% V 2.0%E; CPI CORE Y/Y (FINAL READING): 0.9% V 0.9%E
(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPURCHASE RATE UNCHANGED AT 4.75%; AS EXPECTED
(TR) TURKEY CENTRAL BANK (CBRT) LEAVES BENCHMARK REPURCHASE RATE UNCHANGED AT 8.00%; AS EXPECTED
(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED
(UK) BOE MAR MINUTES: VOTED 8-1 TO LEAVES INTEREST RATES UNCHANGED AT 0.50% (Forbes dissented, called for 25bps hike)
(US) FEB HOUSING STARTS: 1.29M V 1.26ME; BUILDING PERMITS: 1.21M V 1.27ME
(US) INITIAL JOBLESS CLAIMS: 241K V 240KE; CONTINUING CLAIMS: 2.03M V 2.05ME
(US) MAR PHILADELPHIA FED BUSINESS OUTLOOK: 32.8 V 30.0E
(EU) ECB's Nowotny (Austria): ECB strategy for tightening policy will be different from the US Fed; ECB could raise rates before QE ends - Handelsblatt interview
(CL) CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 25BPS TO 3.00%; AS EXPECTED
FRIDAY
TIF Reports Q4 $1.45 (adj) v $1.37e, R$1.23B v $1.22Be
(US) FEB INDUSTRIAL PRODUCTION M/M: 0.0% V 0.2%E; CAPACITY UTILIZATION: 75.4% V 75.5%E
(US) Fed's Kashkari (dove, dissenting voter): Fed should only resume rate hikes after it publishes a plan to reduce balance sheet and sees the market reaction to it
(US) FEB LEADING INDEX: 0.6% V 0.5%E (highest level in over a decade)
(US) MAR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 97.6 V 97.0E
(US) New York Fed Nowcast: cuts Q1 GDP forecast to 2.8% from 3.2% on 3/10; cuts Q2 GDP forecast to 2.5% from 3.0%
(US) Weekly Baker Hughes US Rig Count: 789 v 768 w/w (+2.7%) (9th straight weekly rise)
