17.09.2015 market recap galore
Last day of the week! It will pass and we'll head in-to the weekend. The events yesterday showed for me that FED may have lost its forward-guidance, its awareness of the market and its connection to the market participants, but they have one thing left very strong - patience. And we can't say its a rate turmoil, because nothing bad actually happens. Now its just a prolonged decision because FED is every month a glimpse away from reaching a consensus and act and then... Something happens, elsewhere that trumps their will to act. So it seems that US is maybe on the right track, pullings itself out of the slag, out of the subdued economic condition, showing great improvement in the labor market, somewhat in spending, more people are employed, but factors like China "coughing" and low oil prices are not allowing for that precious for the FED inflation to rise and not even to 1%. Just to remind you, their objective is 2% and by 2016. US economy has risen only to find that other conditions from the outside are not met which cast a depended - shadow over its final objectives and to pursue greater economic advance. So FED waits. Maybe in-time oil prices will go up, other economies will achieve somewhat stability, the risk from EMs will lower. Winter is coming and with the low oil and gas prices we may see actually a jump in energy spending and consuming which may drive the prices up in the coming months. Still FED may take a risk, making a huge assessment and betting on a long-shot that other conditions will improve in-time and will overpass and combine with the already going US economy at a new rate. Highlight and short summaries of yesterday's event:
Starting with data from 17.09.2015. We had NZD GDP coming in negative 0.4% from /05.%/0.2%, BOJ Gov Kuroda Speach, CHF Labor rate flat at -0.75%/-0.75%/-0.75% and a monetary policy assessment, Italian Trade Balance positive at 8.03B/2.47B/2.81B, GBP retail sales flat at 0.2%/0.2%/0.2%, USD building permits positive at 1.17M/1.15M/1.13M, unemployment claims fallen to 264k/276k/275k, housing starts in negative at 1.13M/1.16M/1.16M, Phily Fed Manufacturing Index negative at -6.0/6.1/8.3, Federal Funds Rate flat at 0.25%/0.25%/0.25% and FOMC statement and economic projections, and FOMC Press Conference.
FOMC meeting highlights: No policy change, 0-0.25% target remains appropriate, global econ, fin events may restrain econ activity, vote 9-1 Lacker dissents, wanted 25bps hike, FCOM lowers l-run equilibrium ffr est to 3.5% vs 3.8% in june, 11 participants see ffr below 0.5% end 2015 vs 7 june, econ will expand with moderate pace, labor mkt improved solid, job gains, unemp declining, one participant sees negative ffr end 2015 and end 2016, market-based measures of inflation compensation moved lower.
Talks of a government shutdown: Yellen has a response and its a warning. She also stated that the threat of a shutdown played absolutely no role in the central bank's decision to delay an interest-rate increase, it could very well become a risk going forward.
PIMCO sees little indication FED has conviction on December hike.
Federal Reserve speakers are coming up over the weekend. John Williams, President of the Federal Reserve Bank of San Francisco is speaking at 1730GMT on Saturday, 19.09.2015. It will be an economic outlook with Q&A afterwards. James Blunt, President of the Federal Reserve Bank of St. Louis is speaking at 1930GMT, also on Saturday, also on his outlook of the US economy.