Wednesday, 29 March 2017
Earlier this month, the Federal Reserve raised its short-term interest rate for the second time in almost a decade. The move was widely anticipated by investors, which reached to the conclusion due to several factors, including upbeat labor market conditions, inflation data and a recent change in Fed Chair Janet Yellen’s rhetoric.
That’s right. The Fed Chief has modified her approach to monetary policy normalization over the last few months, a sudden hawkish change that investors just couldn’t let pass. However, the latest FOMC statement and remarks from Yellen were seen as less hawkish than expected.
Once again, investors have started to wonder whether the Federal Reserve will move forward with other benchmark rates increases this year or rather wait for further economic reports as the Trump administration continues to settle in (together with its political agenda)
“If things really take off, if we get continued strong growth and if underlying inflation really picks up, we could get four [rate increases] this year,” said Chicago Fed President Charles Evans in an interview with Bloomberg TV on Monday.
Evans also explained that there is no strong case so far to consider four rate hikes. Inflation and other indicators would have to (of course) back such decision.
"If I thought that I was inclined to four rate hikes for 2017 I would presumably be seeing a much stronger lift in inflation, I think it would be accompanied by a meaningful increase in long term inflation expectations."
And that’s the big question, not if there will be more rate hikes this year, but how many of them. Before the March meeting, investors were only weighing in two rate hikes for this year, one in June and another one in December. The March hike was a game changer.
Conservative analysts believe three rate hikes is the way to go, with March, June and December as tentative dates. An increasing number of traders, and not only traders, think there could be more than three rate moves later this year, especially due to speculation on Trump policies.
US stock markets have been growing consistently since November elections based on expectations that a Trump government will promote solid economic growth by rising fiscal spending, lowering business taxes and deregulating key industries.
In order to answer our main question, we may have to keep our eyes wide open and carefully follow key Fed indicators, such as employment data and CPI reports.
Gold futures fell in Asian hours on Wednesday as market participants prepared for a long-awaited formal application of the United Kingdom to leave the European Union.
British Prime Minister Theresa May is expected to trigger Article 50 of the Lisbon Treaty later in the day. Negotiations between the UK and the bloc can take up to two years.
On the Comex division of the New York Mercantile Exchange, gold for April delivery dropped 0.48 percent to trade at $1249.60 a troy ounce as of 07:00 GMT.
The yellow metal closed mostly flat on Tuesday, remaining near one-month peaks as players shifted their focus to economic reports and speeches from FOMC officials in search for hints on the timing of the next Federal Reserve interest rate hike.
Earlier this week, Chicago Fed President Charles Evans and Dallas Fed President Robert Kaplan said that the US regulator is likely to continue on its path for monetary normalization and even four rate hikes were on the table if economic data supported the decision.
Gold futures have started the week with strong support as the Trump administration failed to get enough votes to push its healthcare bill in Congress, unveiling coordination problems between the President and its Republican party. The news increased concerns that other economic policies will face same fate in Congress unless the government changes its approach.
Oil futures moved higher in Asian session on Wednesday as disruptions to Libyan crude production prompt up prices after an industry report showed a larger-than-expected build in US stockpiles last week, while investors looked ahead of official figures in the day.
US West Texas Intermediate oil futures traded at $48.60 a barrel on the New York Mercantile Exchange, up 0.48 percent from its previous settlement. The international Brent crude oil futures rose by 0.41 percent to trade at $51.54 a barrel as of 05:05 GMT.
According to the American Petroleum Institute, crude oil inventories increased by more than 1.91 million barrels in the week ended on March 24, while gasoline stockpiles came down by 1.10 million barrels and distillates dropped by 2.04 million barrels.
The US Energy Information Administration will release its weekly official report on crude and refined products stockpiles at 14:30 GMT, with analysts seeing a 1.357 million barrels increase.
Meanwhile, Libyan crude output has come under significant pressure after armed groups blocked oil production in Sharara and Wafa, which accounts for 252,000 barrels per day.
In other news, Iranian Oil Minister Bijan Zanganeh anticipated that a joint output cut extension between OPEC and non-OPEC countries is possibly going to be renewed for another period.
The oil cartel, in collaboration with independent producers such as Russia, agreed to reduce global output levels by 1.8 million barrels per day during the first six months of 2017.
Fort Financial Services
Tuesday, 28 March 2017
Wall Street index futures pointed to a higher opening on Tuesday pre-session hours as investors prepared for economic data and Fed speakers, including Chairwoman Janet Yellen.
US stock indexes ended mostly lower on Monday as the recent healthcare failure continued to weigh on market sentiment and players started to wonder about the future of the tax reform.
The Dow Jones industrial average closed nearly 45 points to the downside, with investment bank Goldman Sachs as the main decliner. The S&P 500 also came under pressure, dragged by banking and telecom stocks. The Nasdaq was the only index that closed on a high note.
- Dow Jones Industrial Average: -0.22 percent / 20550.98 points
- Standard & Poor’s 500: -0.10 percent / 2341.59 points
- Nasdaq Composite: +0.20 percent / 5840.37 points
The healthcare bill vote was pulled and with it, expectations for other economic promises vanished. Trumpcare was seen by investors as an example of how the government deals with congressmen and GOP leadership. The negative outcome has been interpreted as a sign of weakness from a negotiation standpoint, which adds concerns over a long-awaited tax reform.
There were no relevant economic reports published on Monday. Tuesday’s data front includes goods trade balance for February as of 12:30 GMT, with expectations for a deficit of $66.60 billions from a previous 68.84 billions. S&P Case-Shiller HPI for January will be available at 13:00 GMT. The Conference Board will also present its Consumer Confidence index for March at 14:00 GMT, with 114.0 points seen by economists.
Market participants will be paying close attention to a fresh batch of speeches from FOMC officials this week. Kansas City Fed President Esther George is scheduled to speak at 16:45 GMT, only five minutes before Fed Chair Janet Yellen begins talking on workforce development in Washington. Dallas Fed President Robert Kaplan is also part of the agenda today, with his remarks starting at 17:00 GMT, while Fed Governor Jerome Powell is coming at 20:30 GMT.
Fort Financial Services
It’s been a while since we have spoken about Brexit and its effects on the British economy and financial markets. But here we are and with great timing, just few days ahead of a long-awaited formal application to exit the European Union.
British Prime Minister Theresa May is expected to trigger Article 50 of the Lisbon Treaty on March 29, giving a first official step to leave the bloc and start negotiations with Brussels. This event has been followed carefully by traders as markets would certainly react on the news.
But hey… what is Article 50? In simply words, it’s the reserves the right for any EU state to quit the bloc unilaterally. It also sets a procedure for leaving the European Union. Article 50 was included in 2007, before there was not legal way to abandon the community.
Three facts about Article 50:
- Once triggered, it cannot be stopped. That’s why it’s so important for markets and well… everybody else. There is no way around it and once it’s done, (oh boy) it’s done.
- The parties involved have two years to negotiate terms of an exit. Yeap. You’ll have to be patience. Not all things move as fast as markets do, especially politicians.
- The final deal between the United Kingdom and the EU has to be passed in the European Parliament and approved by a qualified majority of EU member states
However, the British pound has indeed suffered since last June. After the post-referendum drop, the currency was able to recover and it’s currently trading above the 1.2500 mark. But market analysts from big banks are bearish on the middle/long-term, so be aware. Currencies tend to react faster than any other assets on the market, so if you are planning to trade the official announcement on Thursday, keep your eyes on the GBPUSD, EURGBP and GOLD.
As the process moves forward, investors will have to pay attention to the talks and while they will be long and tedious, they will also worth it 100 percent. Again, currencies and bonds are possibly the best two most volatile assets affected by sentiment during negotiations.
Gold prices edged down in Asian trade on Tuesday as investors received higher demand estimations from China after a report showed that gold imports rose by 50.8% in February.
China is one of gold’s main buyers and any news regarding demand usually has a big impact on bullion prices. Also, a weakening yuan is seen as an opportunity for higher gold demand.
On the Comex division of the New York Mercantile Exchange, gold for April delivery dropped 0.21 percent to trade at $1253.10 a troy ounce as of 06:20 GMT.
The yellow metal ended in green territory on Monday amid growing concerns over the Trump administration and its ability to convince and coordinate efforts with Congress.
Last Friday, Trump’s American Health Care Act (AHCA) was pulled after not enough votes were secured within the GOP, leaving the new government totally empty handed. The AHCA was meant to repeal and replace the so-called Obamacare, but some Republicans believed the new law was not hard enough and even described it as a “light” Obamacare version.
Gold prices moved higher over political uncertainty and concerns of investors regarding the future of other economic promises such as the tax reform or deregulation measures. Trumpcare was seen by investors as an example of the government’s power to push its new agenda.
Market sentiment was certainly affected by the news, although House Speaker Paul Ryan said the cancellation of the healthcare bill vote was not going to stop the tax reform initiative.
US prices moved higher in Asian hours on Tuesday, with market participants looked ahead of an industry report on the US crude stockpiles and as the International Energy Agency anticipated a larger demand of crude oil in Asia.
US West Texas Intermediate oil futures traded at $48.05 a barrel on the New York Mercantile Exchange, up 0.67 percent from its previous settlement. The international Brent crude oil futures soared by 0.59 percent to trade at $51.05 a barrel as of 05:45 GMT.
The American Petroleum Institute is set to release its weekly report on crude and refined products stockpiles, which will be followed by the official report of the US Energy Information Administration on Wednesday. API figures are usually taken as an anticipation of official data.
For the week ended on March 24, economists expected a 1.183 million barrels increase in crude inventories, while distillates and gasoline stockpiles were due to fall in 1.106 and 1.933 million barrels respectively.
Oil benchmarks came under pressure overnight as market players doubted that OPEC and non-OPEC countries will be able to agree on the extension of the so-called output freeze deal. Last weekend, ministers from both parts met in Kuwait to discuss the developments of the current agreement and made clear that a six month extension is still on the table.
The oil cartel and non-OPEC producers such as Russia agreed in November 2016 to reduce production levels by 1.8 million barrels per day in order to rebalance market forces. However, increasing US shale oil production has been threatening to detail OPEC-led efforts. According to the latest EIA report, US crude reserves stand at a record high of 533.1 million barrels.
Fort Financial Services
Monday, 27 March 2017
US equities pointed to a lower opening on Monday amid an empty agenda and as traders looked ahead of a fresh batch of economic data and FOMC speakers.
Wall Street indexes ended mixed on Friday after Donald Trump suffered one of his major politicals hits since he officially became President of the United States.
The American Health Care Act (AHCA), a law meant to repeal and replace the so-called Obamacare, was pulled on Friday before moving to Congress for voting.
The bill faced strong opposition in several fronts, even from GOP members. According to political analysts, there were between 28 and 35 Republicans ready to vote against Trump’s AHCA on Friday, although the new administration couldn’t afford more than 21 no-votes.
From a market perspective, this is a big downturn for Trump’s government. The AHCA was the first serious legislation presented to the Congress and a key piece designed to take away one of Barack Obama’s biggest achievements. Investors saw the healthcare bill as an example of whether Trump can coordinate efforts with Congress or not. Everything is a bit clearer now.
With the AHCA off the road, focus has shifted to other pending questions, such as the long-awaited tax reform or deregulation measures. Uncertainty starts to play again in traders’ minds, slowly but steady. Will Trump present its tax reform? When? What about Congress?...
The Dow Jones industrial average closed nearly 60 points down after showing its worst performance in months on Thursday. The S&P 500 also ended in red territory, with materials dragging it down. The Nasdaq composite was able to finish on the upside.
- Dow Jones Industrial Average: -0.29 percent / 20596.72 points
- Standard & Poor’s 500: -0.08 percent / 2343.98 points
- Nasdaq Composite: +0.19 percent / 5828.74 points
Investors were also paying attention at Baker Hughes’ weekly oil rig count. According to the oilfield service provider, the number of oil rigs in the US increased by 21 units to 652.
On Sunday, a joint committee from OPEC and non-OPEC countries said an extension of the current output cuts was going to be taken for further consideration. The oil cartel and other independent producers such as Russia have agreed to shred 1.8 million barrels for the first semester of 2017, with the goal of rebalance oil supply and push up crude prices.
Fort Financial Services
Boom… Trump’s healthcare bill is over. Or at least for now. The vote was pulled after President Donald Trump understood on Friday not enough Republicans were going to support the project.
Markets reacted quickly on the news, with US stock futures posting strong losses in pre-session trading on Monday. The Dow Jones Industrial Average futures were down by more than 165 points in early hours, while S&P 500 futures dipped nearly one percent, just like Nasdaq 100 futures came down by more than 50 points.
Asian stock indexes also moved lower on Trump’s healthcare failure, with Japan’s Nikkei 225 index ending down by 1.44%. The USDJPY felt nearly one percent in Asian hours, posting one of its worst days since the November election. In commodity markets, gold futures rose due to growing uncertainty to trade around $1,257.90 per ounce.
The US dollar index (USDX), which tracks the greenback against a basket of six major rivals, came down by 0.3 percent to 99.29. The index had reached a 14-year peak of 104.00 in January, over expectations that Trump will bring solid economic growth and higher rates.
Market analysts have been warning for quite sometime that this event will be crucial for the Trump administration as investors treated the healthcare bill as a signal of whether the president is able to coordinate efforts with Congress to promote his agenda or not.
US equity markets have been rising steadily since November 2016 over speculation of higher fiscal spending, tax reform and deregulation in several industries.
The American Health Care Act (AHCA) was Trump’s first attempt to pass a major bill in Congress. Troubles within its own party left him empty handed and on the verge of even bigger problems, such as lack of confidence from investors.
So… what now?
Wall Street is a drama queen. But that doesn’t mean you should be too. On Friday, House Speaker Paul Ryan recognized it was a disappointing day for the Trump administration but reassured that the tax reform is still on the table and the healthcare downturn won’t stop it.
"Yes, this does make tax reform more difficult. But it does not, in any way, make it impossible. We will proceed with tax reform," Ryan said in a late-night conference.
It’s probably a good time to revise all what happened until now and see what the near future has to offer, possibly a lot. So don’t be sad, the Trump rally might not over after all.
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