The US Fed raised rates, the People’s Bank of China followed suit, the Bank of Japan kept its policies unchanged, a lone dissenter at the Bank of England caught the markets off guard, Theresa May gained power to invoke Article 50, and thought leaders focused on the potential effects of fixed income market complacency, and why the markets’ stability in the face of geopolitical and policy events indicates a solid foundation for further appreciation.Read More
Fed Chair Janet Yellen left a March rate hike on the table, U.S. consumer prices rose the most in 4 years, UK wage growth outpaced the recent rebound in inflation, and thought leaders gave their opinions on why the Fed could make a mistake raising rates, why European equities look attractive, two under the radar risks in the U.S. economy, and why the shine may be fading from equities over the near-term…Read More
When it became clear that Trump would indeed win the presidency Tuesday night, financial markets responded violently as Dow Jones Industrial Average futures fell 800 points. Thursday the Dow closed at a record high, marking one of the biggest market turnarounds since the global financial crisis. A new regime requires a new outlook and given…Read More
Kate Davidson & Jon Hilsenrath – The Wall street Journal
Fed to Markets: June Rate Increase Is on the Table
The Fed’s meeting minutes showed that an interest rate increase is still in play for June’s policy meeting. The news rattled investors who, until recently, saw almost no possibility that the Fed would make a move at the June meeting. Most Fed participants judged that if economic growth is improving and inflation it nearing the 2% then it would be appropriate to raise rates. The fact that the Fed is considering a rate hike has mixed implications for investors. If the Fed raises rates then it signals that they feel the economy is improving, on the other hand, an increase in interest rates puts downward pressure on stocks. The idea that rates could be raised in June was not unanimous with things like soft consumer spending and a decline in business activity on the dovish officials’ radar.
Jeff Cox – CNBC
Nonfarm Payrolls: 160K Jobs Added, vs Expected 202K
The US economy added fewer jobs than expected in April, but the unemployment rate held steady at 5%. The disappointing numbers pushed back rate hike expectations in the fed futures markets with prices showing only a 50% chance that the Fed raises rates again this year. The bright spot of the report was wage growth which showed that wages grew at a 2.5% annualized rate. Job growth was concentrated in the services sector while the manufacturing sector continued to struggle. Indicators show little signs of employment gaining momentum unless GDP grows more than expected.
Lindsay Dunsmuir and Jason Lange – Reuters
Fed Signals No Rush to Hike Rates as Economy Hits Soft Patch
As expected, the Federal Reserve left interest rates unchanged but kept the door open for a rate hike at their next policy meeting in June. The most recent statement largely mirrored the release from the March meeting showing that Fed officials see strength in the labor market but are concerned that economic growth may be slowing. The Fed has moved away from citing specific risks and issuing forward guidance while maintaining a ‘wait-and-see’ approach to raising rates.
Rania El Gamal and Reem Shamseddine – Reuters
Key Facts About the Doha Oil Meeting Collapse
Discussions regarding a deal to freeze oil output collapsed on Sunday after Saudi Arabia refused to participate with Iran being present. Eighteen OPEC and non-OPEC oil producing countries had been expected to complete a deal that would stabilize output levels until October 2016 in an attempt to balance supply and demand. The failed meeting will have economic and political consequences. Although low oil prices generally help consumers, prolonged periods of lower prices could damage global growth. Additionally, tensions between Saudi Arabia and Iran and their strategic ally Russia could escalate further as the countries try to cope with lower oil prices.
David Lawder – Reuters
IMF Cuts Global Growth Outlook Again, Warns of Political Risks
In its latest World Economic Outlook, the IMF cut its global economic growth rate for 2016 from 3.4% to 3.2%. The report cited spillover from the slowdown in China, the impact of low oil prices on emerging markets, and weak economic momentum in Japan, Europe, and the United States as reasons for the downward revision. Additionally, the IMF warned that political isolationism, such as the potential “Brexit”, could increase economic inequality and disrupt global trading relationships which would lead to more downward pressure on the global economy.
Jason Lange and Lindsay Dunsmuir – Reuters
Fed Signals Caution on Rate Hikes, Worried by Global Growth: Minutes
The Federal Reserve meeting minutes showed that policymakers debated last month whether an interest rate hike would be needed. A board’s consensus that risks from a global economic slowdown warranted a cautious approach going forward. According to the minutes, several committee members said elevated risks facing by the U.S. economy meant that raising rates in April “would signal a sense of urgency they did not think appropriate.” The committee generally saw global economic and financial developments as continuing to pose risks to the outlook for economic activity and the labor market in the United States. At the close of the meeting, policymakers indicated that they still expect to raise rates twice in 2016 but the timing of the hikes is still up for debate.
Everett Rosenfeld – CNBC
Yellen: Economic Readings Mixed, Appropriate to Proceed Cautiously
Fed Chair Janet Yellen said the Federal Reserve should proceed with caution in adjusting monetary policy, acknowledging that economic and financial conditions are less favorable now than in December in some aspects. The biggest change to the economic landscape, said Yellen, is the weaker projected growth of foreign economies. Yellen maintained that the best policy in this time of increased uncertainty is greater gradualism and for the Fed to be ready to react if the economy grows faster than expected. Although Yellen acknowledged the lack of growth abroad as a concern, she said that the fallout for the US would be limited.
David Lawder – Reuters
IMF: War, Oil Rout Erode Mideast, Central Asia Growth Prospects
Wars and depressed crude oil prices have diminished growth prospects for the Middle East and central Asia, said the IMF. The foundation said that private sector productivity gains are needed to avoid a “new mediocre” for the region. All emerging markets are facing diminished growth prospects over the next five years said the IMF, but those of the Middle East and Central Asian countries are expected to be 1.25 percentage points below the emerging market and developing country average. The region’s oil exporters are being forced to cut spending and shrink bloated public sector employment that had been fueled by oil revenues, which will weigh on living standards and growth prospects.