Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Flat Ahead Of The Fed Interest Rate Decision

Stock-Markets / Financial Markets 2009 Jun 24, 2009 - 03:54 AM GMT

By: PaddyPowerTrader

Stock-Markets

Best Financial Markets Analysis ArticleInvestors paused for breath yesterday before the FOMC meeting announcement tonight at 19.15. Volumes remained low with traders uncertain how the meeting would impact monetary policy down the road. The questions that have to be answered are 1) will the Fed commit to keeping policy loose over an extended period, and 2) if so, will investors be heartened by the expected continuous flood of cash, or will they begin to be concerned over inflation. For equities, this seems like a no-win situation.


Today’s Market Moving Stories

  • Overnight there are allegations that Japanese Finance Minister Kaoru Yosano’s political support group accepted illegal donations from a dummy organisation, a report that could damage the ruling party ahead of an election. Prime Minister Taro Aso must hold an election by October at the latest, in which polls show his long-ruling Liberal Democratic Party (LDP) risks losing to the Democratic Party. Yosano’s support group accepted more than 55 million yen ($580,000) in donations over a period of more than a decade from a dummy organisation that was funded by a futures trading company. Yosano also serves as financial services minister, a position that puts him in charge of regulating the futures trading industry. The names and country may change but the nature of politics worldwide remains the same.
  • China’s annual economic growth will reach about 6.5% in the first half, up from 6.1% in the first three months, National Development and Reform Commission researcher Fan Caiyue said. “The macro economy will gradually resume growth. But we cannot be overly optimistic about the current recovery. Whether the Chinese economy truly picks itself up from the floor and embarks on a new round of growth will depend on the recovery of the global economy and tackling some deep domestic issues that hobble growth.” Fan’s projection points to year-on-year gross GDP growth in the second quarter of about 7%.
  • No greenshoots in Japan during May, as exports were down 40.9% yoy in May. A Bloomberg article quotes Bank of Japan governor Masaaki Shirakawa as saying that while the recession would probably bottom out this current quarter, there are no signs of recovery. The trade data have received numerous comments. Naked Capitalism says Japan is en route for two lost decades, while Brad Setser points out that persistent weakness of Japan’s exports to China means that China’s stimulus is not stimulating Japanese demand.
  • Elsewhere, as I highlighted yesterday, the selloff in the Russian Micex continues. It’s now down 24% this month while the FTSE All World Emerging index is off 9.7%. Another BRIC in the wall of the greenshoots hype.
  • US President Obama acknowledged at a news conference that the unemployment rate will exceed 10% this year but sees no need for a second fiscal stimulus package yet. Data wise, the ABC consumer comfort slide 4 points to -53, 1 point above its all-time low.
  • This morning the Irish Cabinet has approved the outline draft of the legislation backing the establishment of NAMA, ahead of the publication of the full legislation in late July.
  • The FT has the story that the latest June purchasing managers index for the euro area only improved marginally, amid fears that the recovery momentum is being lost. The specific problem was weakness in the services sector. The story says the data showed that the economy was no longer in free fall, as during Q1, but dampened hopes that the euro area could return to positive growth rates this year.
  • When you’re inflicted enough to read several hundred economic articles every week, it’s nice occasionally to hear some honest discussion from an insider that doesn’t sound like nauseating optimism. Roger Orf, CEO of Citigroup’s Property Investments delivered in spades in that regard yesterday, urging governments to pull the bank foreclosure trigger. Orf manages $13 billion in real estate property for Citi.
  • In other Citibank news, despite getting $45bn of government funds, they will raise base salaries by as much as 50% to help compensate for a reduction in annual bonuses.
  • Someone who made more money than Bernie “12 years please” Madoff. Picower and his family managed to withdraw from their various Madoff accounts $5.1 billion more than they invested with the self-confessed swindler.

FOMC Outlook
The FOMC decision will capture the market’s attention today but don’t look for any surprises from the Fed. The 0 to 0.25% range for the fed funds target rate is set to be maintained whilst changes in Treasury and MBS purchases are also unlikely, which will give some relief to bond markets given fears about how the Fed will unwind asset purchases. In this respect, the Fed will likely attempt to assure markets that it will have a credible exit strategy when the time is right. One novel idea, as espoused by the Bank of Canada recently, would be for the Fed to state clearly that they have no intention of raising rates until some time next year. This would instil confidence back into those twitchy Treasury bonds.

In terms of the economy the Fed will remain cautious, and whilst acknowledging some improvement, the FOMC could pick up some of the downbeat comments in the Beige Book. The Fed will continue to highlight that inflation pressures remain subdued, with excess capacity both in product and labour markets. Indeed, the US labour market continues to loosen and as the unemployment rate increases most probably well in excess of 10%, wage pressures will continue to be driven down. There is also plenty of excess capacity in the manufacturing sector and as the May industrial production report revealed the capacity utilisation rate dropped to 68.3%, a hefty 12.6% below its average for 1972-2008. Moreover, as revealed by last week’s release, core inflation remains comfortable at a 1.8% annual rate. Weaker pricing power suggests inflation will remain subdued and will even fall further over coming months.

Equities

  • The yoyo price swings that bedevil mining stocks are back today with Rio Tinto up 4% and Xstrata rising 2% early doors.
  • SAP is benefiting this morning from last nights better than expected numbers from Oracle.
  • The future of Bank of Scotland in Ireland is under review according to media reports this morning. The Irish subsidiary, which received a €750m capital injection from its parent late last year to protect against rising bad debt charges, is facing the review following HBOS’s merger with Lloyds last year. There has been a growing belief that the combined group could pull back from many of its non UK operations, following the UK government’s bail out of the bank. Any foreign departures from the domestic Irish banking market is likely to encourage the remaining players to push a cartel like increase in margins.
  • Ryanair have indicated that they are looking at plans to completely eliminate check in bags by 2010. This initiative is aimed at further lowering airport costs and in particular costs associated with baggage handling. It is unclear how this will affect seasonal large items such as skis and summer holiday luggage. At present 70% of Ryanair passenger do not check in luggage.
  • At oil exploration company Providence Resources’ AGM yesterday, Tony O’Reilly junior predicted that the company will triple its oil exploration levels by 2014. The group plans to raise €16.8m through a private placement of roughly 431m shares to institutions in the UK. Providence has also entered into an agreement with Petronas to acquire 40% of the Kinsale Head gas production, storage and trading business.

Data Today
US Durable Goods Orders are released at 13:30. Look for both overall and excluding the volatile defence and aircraft sectors to have unwound only a portion of the April rise, falling by 0.7% in May.

At 15:00, we get US New Home Sales and look for them to have risen to 360,000 units in May. Barring another credit or financial market shock, which derailed a tentative stabilisation in the housing sector last year, the market is growing increasingly confident that home sales are bottoming.

Then at 19:15, we have the FOMC Statement.

And Finally… He’s Back And Madder Than Ever

Disclosures = None

By The Mole
PaddyPowerTrader.com

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PaddyPowerTrader Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in