Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
The Inflation Mega-trend and UK House Prices - Housing Market Analysis Trend Forecast 2022 to 2025 - 5th July 22
Gold Price Summer Seasonal Doldrums - 5th July 22
Tame Budgies Having Fun on a Grape Vine - UK Parakeet Easy Training - 5th July 22
Is the US Yield Curve Inversion Broken? - 3rd July 22
New Signs Economic Turmoil Will Prompt Fed to Lose Its Nerve - 3rd July 22
Stagflation With Powell Could Make Gold Price Happy - 3rd July 22
UK Housing Market Analysis, Trend Forecast 2022 to 2025 - Part 2 - 30th June 22
Stock Market Turning the Screws - 30th June 22
How to Ignore Stocks (and why you should) - 30th June 22
Top Tips For Getting The Correct Insurance Option For Your Needs - 30th June 22
Central Banks Plan To Buy More Gold In 2022 - 30th June 22
AI Tech Stock PORTFOLIO NAME OF THE GAME - 29th June 22
Rebounding Crude Oil Gets Far Away from the Bearish Side - 29th June 22
UK House Prices - Lets Get Jiggy With UK INTEREST RATES - 28th June 22
GOLD STOCKS ARE WORSE THAN GOLD - 28th June 22
This “Bizarre” Chart is Wrecking the Stock Market - 28th June 22
Recession Question Answered - 28th June 22
Technical Analysis: Why You Should Expect a Popularity Surge - 28th June 22
Have US Bonds Bottomed? - 27th June 22
Gold Junior Miners: A Bearish Push Is Coming to Move Them Lower - 27th June 22
Stock Market Watching Out - 27th June 22
The NEXT BIG EMPIRE WILL BE..... CANZUK - 25th June 22
Who (or What) Is Really in Charge of Bitcoin's Price Swings? - 25th June 22
Crude Oil Price Forecast - Trend Breaks Downward – Rejecting The $120 Level - 25th June 22
Everyone and their Grandma is Expecting a Big Stocks Bear Market Rally - 23rd June 22
The Fed’s Hawkish Bite Left Its Mark on the S&P 500 Stocks - 23rd June 22
No Dodging the Stock Market Bullet - 23rd June 22
How To Set Up A Business To Better Manage In The Free Market - 23rd June 22
Why Are Precious Metals Considered A Good Investment? Find Out Here - 23rd June 22
UK House Prices and the Inflation Mega-trend - 22nd June 22
Sportsbook Betting Reviews: How to Choose a Sportsbook- 22nd June 22
Looking to buy Cannabis Stocks? - 22nd June 22
UK House Prices Momentum Forecast - 21st June 22
The Fed is Incompetent - Beware the Dancing Market Puppet - 21st June 22
US Economy Headed for a Hard Landing - 21st June 22
How to Invest in EU - New Opportunities Uncovered - 21st June 22
How To Protect Your Assets During Inflation - 21st June 22

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

© 2005-2019 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