Rising Expectations of a Fed Rate Hike before Yearend

August 26, 2016

Today’s focus is on Janet Yellen’s address in Wyoming this morning. Ahead of that speech, markets are pricing more than even odds of a hike in the federal funds rate at one of the three remaining FOMC meetings this year and up to a 30% probability officials act at the September meeting.

The dollar lost 0.2% overnight against the Australian, New Zealand and Canadian dollars and dipped 0.1% relative to the yen, euro, Swissie and sterling.

Gold advanced 0.4% to $1,329.60 per ounce. WTI crude oil dipped 0.3% to $47.20 per barrel.

Japan’s Nikkei dropped 1.2% after CPI data revealed more deflation in that economy. Share prices elsewhere in the Pacific Rim rose 0.5% in Hong Kong, 0.2% in Taiwan and 0.1% in China but fell 0.7% in Singapore, 0.5% in New Zealand and Australia, 0.3% in Indonesia and South Korea, and 0.2% in India.

In Europe, stocks have thus far lost 0.6% in Italy as the casualties of the earthquake continue to be added up. Equities also lost 0.4% in Switzerland, 0.3% in Greece, 0.2% in Spain and Germany and 0.1% in France.

The British Ftse is steady. It’s become a matter of faith apparently that Brexit will not devastate the U.K. economy quite as much as feared at first, but time will tell. The ten-year British gilt yield is a basis point lower at 0.56%.

British real GDP expanded 0.6% last quarter and by 2.2% on year. Consumption and gross fixed capital formation went up 0.9% and 1.4%, but net exports exerted a drag.

French GDP was flat in the second quarter and just 1.4% greater than a year earlier. Inventories exerted a 0.7 percentage point drag on GDP growth, offsetting a tiny positive contribution from domestic demand and a more significant support from net exports.

French household sentiment in August returned to June’s level of 97 after dipping to a July reading of 96.

German consumer confidence rose 0.2 points to a 2016 high of 10.2 according to the GFK index, which began the year with a 9.4 reading in January.

Spanish retail sales growth slowed in July to 0.5% on month and 4.9% on year.

Eurozone M3 money growth slowed to 4.8% in the year to July from 5.0% in June, but the on-year 4.9% advance in May-July was the same as in the second quarter. M1 growth quickened by the components of broader money slowed. Loans to households rose 1.9% on year, similar to the 1.8% on-year rise of lending to non-financial firms.

Icelandic CPI inflation slowed to an 18-month low of 0.9% in August.

Japanese consumer price deflation held steady at -0.4% in July, but core deflation deepened to -0.5%. Core Tokyo deflation in August was also -0.4%. The data’s reference year was updated to 2015 from 2010 over the previous half-decade.

Consumer confidence in South Korea printed at 102 in August, up from 101 in July and readings of 99 in May and June.

Industrial output in Singapore fell by 4.0% on month and 3.6% on year in July. These result were much worse than forecast.

Scheduled U.S. data releases today feature revised 2Q GDP, the monthly advanced trade balance estimate, and the U. Michigan consumer sentiment index. But Yellen’s speech is the most eagerly awaited event of the day.

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



Tags: , ,


Comments are closed.