Daily Briefing – Thursday, June 15, 2017
The Federal Reserve’s Open Market Committee yesterday fulfilled expectations by adding another quarter percent to interest rates, saying it expects inflation to stabilize at 2% in the mid-term. Chair Janet Yellen also outlined the bank’s balance sheet reduction plan by limiting re-investments on an upward graduating scale. The decision chose to ignore weak US data, including yesterday’s business inventories 0.2% drop, retail sales 0.3% decline (their worst since January 2016), and a 27-month low in consumer price inflation of 1.7% (on expectations of 1.9%). The US dollar spiked, then bounced momentarily on the news, and FAANG stocks once again collapsed, drawing down the Nasdaq 0.41%. And on the sidelines, the US Senate yesterday approved additional sanctions against Russia for “meddling” in the 2016 US elections. These new sanctions cannot be eased by presidential order except with the approval of Congress.
The European Commission will sue Poland, Hungary and the Czech Republic for blocking asylum seekers infringing on EU defined quotas. Indexes across the continent are down on the drop in oil prices. And, as the UK sets up for the central bank’s interest rate decision this afternoon, earnings were down yesterday and signs of a slowing real estate sector abound in falling prices. And in an interesting note, the German Statistical Office reports that the number of British citizens becoming naturalized Germans has quadrupled since the Brexit vote last year.
China yesterday announced it was approving genetically modified crops, opening the way for US imports. Corn, wheat, soybean and other food commodities were up on the announcement. In spite of yesterday’s US interest hike, the People’s Bank kept interest steady at 2.45% while injecting a further $15bn into financial markets. New Zealand reported a slight rebound in Q1, 0.5% QoQ, but less than expected; whereas Australia’s employment numbers were up: unemployment dropped to 5.5%, its lowest rate since 2013, and participation rose to 64.9%.
Oil yesterday toppled towards the $44 handle after the EIA released a smaller-than-expected drawdown – 1.66mB instead of 2.74. Aramco owners in Saudi Arabia are at present discussing where to perform their 2018 IPO, with the consensus gravitating towards the London Stock Exchange. Some worry that if the offering were to take place in the US, it would open the company to terror-attack based court action. Gold took a rest from its 6-session losing streak, but then resumed it on the FOMC policy release. And a new US law against money laundering, terror financing and counterfeiting will force businesses to report issuance of Bitcoin and travelers to report the transport of the crypto-currency into and out of the country. The law is being described as “ludicrous” since nobody actually “issues” Bitcoin, and being virtual, its transport across borders cannot be monitored.
|8:30 AM GMT||UK: Retail Sales, followed at 11 by the Bank of England’s Interest Rate|
|10 AM GMT||EU: Trade Balance|
|12:30 PM GMT||US: Jobless claims, Import & Export prices and at 2, Housing Market index|
|2 AM GMT (+1)||Japan: Monetary policy & Interest rates.|