10 February, 2016
FX News Today
Kocherlakota says FOMC should go negative on rates. It would be a “daring, but appropriate” move that would speed up the attainment of a 2% inflation rate, he said. He broached that idea back in October. While the Fed could discuss negative rates at its March meeting, especially after the BoJ’s surprise move, we suspect adopting such a policy would be a very last-ditch effort to address a deep contraction in the economy. At this point we’d view any public comments more as lip-service to indicate there are more tools in the stimulus bag that could be used. However, it’s not obvious to us that negative rates would be a solution,
Atlanta Fed’s GDPNow Q1 estimate was raised again to 2.5% from 2.2% previously thanks to the wholesale trade report, actually above the median Blue Chip economist forecast of 2.3% for a change: “The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 2.5 percent on February 9, up from 2.2 percent on February 5.
The US wholesale trade report undershot estimates with December sales and inventory declines that followed larger November drops that were exacerbated with downward revisions, leaving a sustained climb in the inventory-to-sales (I/S) ratio to a lofty 1.32 expansion-high. We still expect a downward Q4 GDP growth bump to 0.5% from 0.7%, while the I/S rise signals downside risk for our 1.8% Q1 GDP forecast.
US JOLTS showed job openings surged 261k in December to 5,607k following a 3k November decline to 5,346k (revised from an 82k gain to 5,431k). The JOLTS rate climbed to 3.8% from 3.6% (revised from 3.7%). Hiring increased 105k to 5,361k following an 88k gain to 5,256k (revised from 5,197k). The rate was unchanged at 3.7% (November revised up from 3.6%). Quitters were up 196k to 3,055k after a 75k increase to 2,859k (revised from 2,831k). The quit rate, a favorite of Fed Chair Yellen, rose to 2.1% from 2.0%. The solid JOLTS report is consistent with the strength in the jobs report from Friday.
Main Macro Events Today
European Commission Economic Growth Forecast: DG ECFIN produces various economic forecasts on behalf of the European Commission. Economic forecasts concentrate on the EU, its individual member states, and the euro area but also include outlooks for some of the world’s other major economies, and countries that are candidates for EU membership.
Fed Chair Yellen’s Monetary Policy Report will be key for market direction for the foreseeable future. Her prepared remarks will be released at 8:30 ET, after which she’ll testify before the House Financial Services Committee (from 10:00 ET). She’ll go in front of the Senate Banking Committee on Thursday. The focus will be on the tone of her remarks, whether it’s dovish or not.
US Crude Oil Inventories: The number of barrels of crude oil held in inventory by commercial firms is released today. After previous two weeks’ rather high inventory numbers (7.8M) we should see the inventories at 3.1M level. However, the actual numbers have lately deviated quite strongly from the analyst expectations.
Nikkei gained 1.09% after a strong close on Wall Street and with the earnings season starting to overshadow lingering trade jitters at least for now. A weaker...
U.S. trade tariffs tightened market conditions. Coeure said that “while the effects of any tariffs on output and inflation may take time to materialise, falls...
China and Hong Kong alongside other markets were closed for Lunar New Year holidays, which muted trading, but the Nikkei gained 1.19%...
The U.S. currency has been correlating inversely with global stock market direction of late on the causation that risk-on phases have seen investors...
U.S. personal income rose 0.3% in November with spending up 0.6%. The 0.4% increase in October income was not revised. The 0.3% spending increase..
The FOMC meeting is front and center this week following the solid November jobs report on Friday, which provided the final bit of cover for...
Asian stock markets headed south again, as declines and energy and mining stocks led shares lower amid a further drop in metal prices. Concern China’s regulators may limit the flow...
The rout on Chinese bond and stock markets that dominated Thursday’s session faded and the Nikkei managed a 0.12% gain as the yen...
After a couple of panicky moments in global equities over the past week, the markets will keep a wary eye on political developments. In Washington...