Awaiting a Likely Fed Rate Hike and Yellen’s Press Conference

December 14, 2016

The Fed’s announcement is due at 14:00 EST (19:00 GMT). A rate hike is like for the first time in a year. Chair Yellen’s press conference starts 14:30 EST. New forecasts will be unveiled.

The dollar is down 0.3% against the euro and yen.

Ten-year sovereign debt yields fell overnight by six basis points in Germany and Canada, five bps in the U.S. and U.K., 4 bps in Switzerland and two bps in Japan.

West Texas Intermediate oil settled back 0.9% to $52.53 per barrel, interrupting a strengthening trend in the past few sessions. Oil-sensitive currency like the Norwegian krone and Russian ruble dropped in sympathy with oil’s corrective move.

Comex gold is 0.5% stronger at $1,164.40 per ounce.

Stocks in Asia, Europe and North America are marginally lower.

Released U.S. data prior to the FOMC announcement showed

  • A 0.4% drop in November industrial production, which was also 0.6% lower than its year-earlier level. Capacity usage fell 0.4 percentage points to 75.0%.
  • A weaker-than-expected 0.1% uptick in November retail sales, with motor vehicle and parts sales falling by 0.5%. Retail sales were 3.8% higher than a year ago, nonetheless.
  • A 0.4% rise in producer prices lifting the on-year pace to 1.3% in November from 0.8% in October. Core PPI inflation ticked up 0.2 percentage points to 1.8%.
  • A 4% decline in mortgage applications last week.

Japanese industrial production in October was revised marginally to zero change from a 0.1% uptick reported initially. Production fell 1.4% on year. Capacity usage and capacity dropped 1.9% and 0.6% on year.

Industrial production in the euro area dipped 0.1% in October, marking the third decline in four months. In year-on-year terms, output growth slowed to 0.6% in October from 2.4% in August.

British labor statistics revealed a smaller-than-expected 2.4K increase in November’s claimant count, an unchanged 4.8% jobless rate in August-October on an ILO basis, and slightly greater but still subdued on-year growth in wage earnings of 2.6% on regular pay and 2.5% on full compensation including bonuses.

The Swiss PPI/import price index edged up 0.1% in November but recorded a larger 0.6% on-year decline. The ZEW expectations index of investor sentiment toward Switzerland improved for a fourth straight time, printing 4.0 points higher at 12.9 in December.

In the year to November, consumer prices rose 0.7% in France and Finland and 0.1% in Italy.

Indian wholesale price inflation slowed to 3.16% in November from 3.39% in October.

South African CPI inflation accelerated somewhat to 6.6% in November from 6.4% in October.

Iceland’s central bank surprised some analysts with a 25-basis point cut of its 7-day deposit rate to 5.0%. This was a follow-up move to a 50-bp reduction in August and was defended as appropriate in light of the krona’s appreciation recently.

Chile’s central bank interest rate was left unchanged at 3.5% where such has dwelled since a 25-bp hike a year ago.

Chinese bank lending totaled CNY 795 billion last month, somewhat greater than expected. On-year growth in M2 and M1 money aggregates slowed slightly to 11.4% and 22.7%, but M0 accelerated to 7.6%.

The latest Bank of Japan quarterly business survey revealed significantly improved corporate confidence at the moment but expectations that conditions will be less favorable than now in three months time. Projected business spending growth was revised a bit lower.

Australian new motor vehicle sales fell 0.6% in November.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

 

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