Random Market News, 14 June
"Fed Raises Rates, Sets Out Plan to Shrink Asset Holdings Beginning This Year.
Central bank pencils in one more rate increase later this year if the economy performs as expected."
"Yellen Doubles Down on Bet Hot Job Market Stokes Inflation.
Fed chief counsels against overreacting to recent price data.
Economists caution her gamble hinges on a 60-year-old theory."
"How Allocators are Weatherproofing Their Portfolios.
Asset owners are employing new defensive strategies to create a so-called offset that can help protect against a future market crisis."
"PSP Investments returns 12.8% for fiscal year, above its benchmark.
PSP Investments, which manages the assets of the C$135.6 billion ($101 billion) Public Sector Pension Investment Board, Ottawa, returned a net 12.8% in the fiscal year ended March 31, nearly one percentage point above the policy benchmark, a news release said. The best-performing asset class was private debt, which returned a net 27.5% compared to its 12.4% benchmark return, followed by natural resources at a net 19.5% vs. its 5.3% benchmark return; public markets, 16% vs. 14.9% for its benchmark; infrastructure, 14.4% vs. 5.2% for its benchmark; real estate, 10.8% vs. 6.2% for its benchmark; and private equity, -3.4% vs. 9.3% for its benchmark."
"More SWFs take to private debt but capital-raising levels off.
Capital raised for private debt funds closed in 2016 totalled $94bn, Preqin said in its report, down from $98bn in 2015. However, this was still almost quadruple the $25bn raised in 2009."
Implied July 26th rate hike probability ~97.5%, 2 rate hikes by September 20th ~18.0%.
VIX ~10.64. 10-yr treasury vol (TYVIX) ~4.25.
"Fed Raises Rate To 1.25%
The Federal Reserve raised the target range for its federal funds rate by 25bps to 1 percent to 1.25 percent during its June 2017 meeting, in line with market expectations. Policymakers kept forecasts for three rate hikes this year while increasing growth projections and lowering inflation expectations. In addition, details on how the central bank will start reducing its USD 4.5 trillion portfolio were also provided.
US Stocks Trim Losses After Rate Hike
Wall Street closed mixed on Wednesday, with the S&P 500 and Nasdaq trimming losses and the Dow Jones jumping to the green late in the session after the FOMC’s statement release. The Fed raised the target range for its federal funds rate by 25bps to 1 percent to 1.25 percent during its June meeting, matching expectations. Policymakers kept forecasts for three rate hikes this year while increasing growth projections and lowering inflation expectations. The Fed also said starting “this year” it would gradually shrink its $4.5 trillion balance sheet. The Dow Jones edged up 46 points or 0.2 percent to book a fresh record of 21375. Contrastingly, the S&P edged down 2 points or 0.1 percent to 2438. The Nasdaq retreated 25 points or 0.4 percent to 6195.
DAX 30 Hits All-Time High On Wednesday
The DAX 30 was up 100 points or 0.8% to a record of 12864.8 around 11:55 AM London time on Wednesday as tech shares stabilized after a two-day selloff that started last Friday and investors are anticipating another 25bps hike in Fed funds rate later in the day. Meanwhile, other major stock indexes in Europe posted gains: the FTSE 100 gained 42 points or 0.6%; the CAC 40 went up 42 points or 0.8%; the FTSE MIB added 59 points or 0.3% and the IBEX 35 traded 22 points or 0.2% higher.
Hong Kong Raises Base Rate 25Bps After Fed Hike
The Hong Kong Monetary Authority raised the base rate by 25 basis points to 1.50 percent on June 15th, 2017, tracking a similar move by the US Federal Reserve as its currency is pegged to the US dollar. The central bank sets its base rate through a formula that is 50 basis points above the prevailing US Fed Funds Target or the average of the five-day moving averages of the overnight and one-month HIBORS (Hong Kong Interbank Offered Rate), whichever is higher.
China Leaves Short-Term Interest Rate Unchanged
The People’s Bank of China left interest rate for open market operations unchanged on June 15th, 2017, despite the Federal Reserve's decision to raise the target range for its federal funds rate by 25 bps. The rate for 7-day reverse repurchase agreements remained at 2.45 percent, the 14-day tenor at 2.60 percent and the 28-day tenor at 2.75 percent, PBoC said in statement on its website. The benchmark lending rate was held steady at 4.35 percent. It was last cut by 25bps in October 2015.
Australia Jobless Rate Down To 51-Month Low Of 5.5%
Australia's seasonally adjusted unemployment rate unexpectedly fell to 5.5 percent in May of 2017 from 5.7 percent in April and below market estimates of 5.7 percent. It was the lowest jobless rate since February 2013, as the economy added 42,000 jobs while the number of unemployed declined by 18,600.
Oil Prices Hit 7-Month Low
Oil prices decreased to the lowest level since November 14th, 2016 on Wednesday, after the latest US Energy Information Administration report showed crude inventories fell by 1.66 million barrels, compared with expectations of a 2.7 million barrels decline. Crude oil prices slumped 3.1% to $44.9 per barrel and Brent crude oil decreased 3.1% to $47.2 per barrel around 10:50 AM New York time.
Dollar Hits 8-Month Low
The dollar index fell to the lowest level since October 5th last year on Wednesday after the US inflation rate came in lower than expected and retail sales decreased the most in 16 months. The DXY was down near 0.5% to 96.5 around 09:45 AM NY time.
US Retail Sales Fall The Most In 16 Months
Retail sales in the United States decreased by 0.3 percent month-over-month in May of 2017, following a 0.4 percent rise in April and missing market expectations of a 0.1 percent gain. It was the biggest decline since January of 2016, driven by lower sales of motor vehicles, electronics & appliance stores, gasoline stations, sporting goods, hobby, book & music stores and general merchandise stores. On a year-on-year basis, retail sales rose 3.8 percent.
Japan Industrial Output Rises The Most In Near 6 Years
Industrial production in Japan rose 4.0 percent
month-on-month in April of 2017, compared to a 1.9 percent drop in March and in
line with preliminary figures, final data showed. It was the fastest rise in
industrial output since June 2011, as production rebounded for iron & steel
(3.2 percent vs -1.6 percent), fabricated metals (1.4 percent vs -2.2 percent);
general purpose & business oriented machinery (8.7 percent vs -5.9
percent), electronic parts (5.2 percent vs -4.8 percent), electrical machinery
(0.6 percent vs -0.8 percent), transport equipment (10.8 percent from -1.1
percent) and chemicals (1.2 percent vs -0.1 percent). Also, output went up more
for: non-ferrous metals (1.4 percent vs 0.6 percent) and plastics (1.4 vs 0.2
percent). In contrast, output fell for petroleum & coal (-1.1 percent vs
-2.3 percent) and pulp (-1.0 percent vs 1.9 percent). On a yearly basis, output
gained 5.7 percent, faster than a 3.5 percent rise in March."
"Education Costs Are Rising at the Slowest Pace in Decades."
"Why It Took 27 Years for This Japanese Delivery Giant to Hike Prices."
"Import Growth Slows at U.S. West Coast Container Ports.
More supply chain routes appear to have shifted to ports on the East Coast."
"CMA CGM to buy Brazilian line Mercosul from Maersk."
"General Mills, Campbell Soup, Kellogg’s & Tyson Ramp Up Food Investment.
Since 2015, top food corporates have launched investment vehicles to fund early-stage food and beverage startups."
"A Colonoscopy Robot and Other Weird Biomedical Tech From IEEE's Biggest Robotics Conference."
"Google Will Buy Modular Homes to Address Housing Crunch.
Silicon Valley giant aims to buy 300 apartment units amid stiff Bay Area market."
"US considers restricting Chinese investment in artificial intelligence."
Random Place of the day.
"Mayong - The Land of Black Magic. The Indian capital of black magic and witchcraft.
"IKEA designers are training with NASA’s space architect to come up with ideas for compact storage."
Switzerland CH: Producer and Import Price Index, 3:15 AM ET
Switzerland CH: SNB Monetary Policy Assessment, 3:30 AM ET
Italy IT: CPI, 4:00 AM ET
Great Britain GB: Retail Sales, 4:30 AM ET
European Union EZ: Merchandise Trade, 5:00 AM ET
Great Britain GB: BOE Announcement & Minutes, 7:00 AM ET
India IN: Merchandise Trade Balance, 8:30 AM ET
USA US: Jobless Claims, 8:30 AM ET
USA US: Philadelphia Fed Business Outlook Survey, 8:30 AM ET
USA US: Empire State Mfg Survey, 8:30 AM ET
Canada CA: Manufacturing Sales, 8:30 AM ET
USA US: Import and Export Prices, 8:30 AM ET
USA US: Industrial Production, 9:15 AM ET
USA US: Bloomberg Consumer Comfort Index, 9:45 AM ET
USA US: Housing Market Index, 10:00 AM ET
USA US: EIA Natural Gas Report, 10:30 AM ET
USA US: Money Supply, 4:30 PM ET