U.S. future indexes are inching upwards with a particular sense of uneasiness that is reverberating through global financial markets this morning, and while stopping short of alarm-bell ringing risk aversion, the underlying tone is somewhat downbeat.
Markets are expected to open up.
Here is the current market situation from CNN Money
Ripped from the pages of "House Of Cards," it appears that the asking of difficult questions of she-that-shall-be-obeyed is entirely unacceptable to Janet Yellen and her Fed.
In March - the last Q&A session post-FOMC statement, Dow Jones reporter Pedro da Costa dared to ask about The Fed's leaking of crucial details about FOMC decisions to a newsletter and its subsequent refusal to comply with Congressional demands for those details.
The difficult question starts at around 45:30....(but look at Yellen's face when asked the question for a clue as to her next move)...
PEDRO DA COSTA. Pedro da Costa with Dow Jones Newswires. I guess I have two follow-ups, one with regard to Craig's question. So, before the IG's investigation, according to Republican Congressman Hensarling's letter to your office, he says that, "It is my understanding that although the Federal Reserve's General Counsel was i ...
CHICAGO (Reuters) - Package delivery firm FedEx Corp on Wednesday reported a quarterly net loss due to a $2.2 non-cash pretax charge related to a move to mark-to-market accounting for employee pensions.
The two day FOMC meeting concludes this evening with their interest rate decision and this time their quarterly economic projections will see an update to the famous dot chart. A great deal of attention has been placed on when the tightening cycle will start and it wasn't too long ago that many were expecting tonight to mark the first rate hike, however the Fed is trying to shift the market's focus onto the tightening cycle as a whole, which means not just when it will start, but when and where it will peak.
Unquestionably last month's nonfarm payroll was impressive enough to trigger a shift in expectation of a hike slightly earlier, so to September and this will be key as to how this is assessed in tonight's press conference and economic projections, with the potential for a dollar bounce. However, Yellen has referred more frequently to global risks in recent months so it's hard to see her stance being more hawkish and to see a repeat of the dollar strength we saw earlier in the year.
Also today there's UK unemployment data released at the same time as the BOE minutes so there could be some moves in sterling which has been gaining ground so far this week. Another potential market making moving event to keep an eye on comes shortly after the FOMC when IMF's head Christine Lagarde makes a speech in Brussels.
There is a particular sense of uneasiness that is reverberating through global financial markets this morning, and while stopping short of alarm-bell ringing risk aversion, the underlying tone is somewhat downbeat. The queasiness began in Asia where Chinese stocks tumbled and the Shanghai Comp closed lower by roughly 3.5%, adding to the rollercoaster-like price action witnessed recently as valuations rocket well past where earnings growth would suggest.
The challenge for investors will be to navigate around what looks to be an impending bubble in the Chinese stock market, as a bubble only becomes apparent once it pops and subsequently deflates.
The vast wealth in China that has been rotating from the property market and into the equity market will help dissuade the notion of an impending burst of the rapidly inflating stock market, though it seems to be only a matter of time before there is a prolonged correction and investors decide to take profits off the table in a market that is twice as expensive as when the Shanghai Comp peaked in October of 2007.
The lack of any moderately hopefully developments in the Greek saga saw that the pessimistic developments in Asia filtered through to the European session. The proverbial kicking of the Greek debt can is beginning to run out of road, and the announcement that Greece would not be presenting a new proposal and that the Troika would have to work off the plan already deemed as inadequate has not inspired confidence throughout the investment community.
The refusal of the Greek government to submit a new proposal makes the likelihood of a grand deal being agreed to by this Thursday's finance minister meeting close to nil, and talks of Eurozone officials holding an emergency summit over the weekend increases the chances the Greek endgame is nearing.
Given the full implications of a "Grexit" are still yet to be known with certainty, the uneasiness is prompting investors to take some risk off the table. Though the euro had moved higher against the greenback overnight, it now resides in the red as investors shed exposure to the common-currency unit.
In its latest long-term budget outlook, the Congressional Budget Office has some troubling numbers.
According to the CBO, the long-term budget picture of the US, having seen a modest rebound in recent years, is about to take another big step down driven primarily by the US demographic shift. Specifically, it says that if current laws on taxes and spending remain, "deficits and federal debt held by the public would remain roughly stable in the near term, reflecting the anticipated further strengthening of the economy and constraints on federal spending built into law" however it cautions that "the outlook for the budget would steadily worsen over the long term."
Well, one can debate whether the US economy is strengthening, especially when one considers that in reality quite the opposite is taking place...
... confirmed recently by none other than Goldman which last month cut its long-term potential growth rate for the US by half a percent from 2.25% to 1.75%.
That about covers the persistent upside bias to CBO forecasts. Now the downside.
According to the CBO, "mainly because of the aging of the population and rising health care costs, CBO's projections show a substantial imbalance in the federal budget over the long term, with revenues falling well short of spending. As a result, budget deficits are projected to rise steadily and federal debt held by the public is projected to exceed 100 percent of GDP by 2040, a level seen only one previous time in US history - the final ye ...
ATHENS (Reuters) - The Greek central bank warned on Wednesday that the country would be put on a "painful course" towards default and exiting the euro zone if the government and its international creditors failed to reach an agreement on an aid-for-reforms deal.
PARIS (Reuters) - Russian cargo airline Volga-Dnepr Group has signed a memorandum of understanding to buy and lease a total of 20 more Boeing 747-freighters in what would be a major boost for the U.S. planemaker's struggling four-engined jumbo.
The situation in Greece has escalated meaningfully since last week. After the IMF effectively threw in the towel and sent its negotiating team back to Washington on Thursday, EU and Greek officials agreed to meet in Brussels over the weekend in what was billed as a last ditch effort to end a long-running impasse and salvage some manner of deal in time to allow for the disbursement of at least part of the final tranche of aid â€'due' to Greece under its second bailout program. Talks collapsed on Sunday however as Greek PM Alexis Tsipras, under pressure from the Left Platform, refused (again) to compromise on pension reform and the VAT, which are "red lines" for both the IMF and for Syriza party hardliners.
By Monday evening it was clear that both EU officials and Syriza's radical left were drawing up plans for capital controls and a possible euro exit with Brussels looking to Thursday's meeting of EU finance ministers in Luxembourg for a possible breakthrough. That seems unlikely however, given that Athens is sending FinMin Yanis Varoufakis whose last Eurogroup meeting ended with his being sidelined in negotiations after putting on a performance that led his counterparts to brand him an amateur, a gambler, and a time waster. For his part, Varoufakis says no new proposal will be tabled in Luxembourg as Eurogroup meetings aren't the place for such discussions, which is ironic because Jean-Claude Juncker said something similar not long ago when the Greeks were trying to get a deal done at the very same Eurogr ...
With the Fed's June FOMC statement in just over 7 hours and a Yellen press conference to follow shortly, one in which nobody expects the Fed will announces its first rate-hiking cycle in nine years despite repeated clues by Yellen that not only is there froth in the market but that the Fed has no dry powder to contain the next crisis when it emerges (even though a rate hike will catalyze the next crisis), traders have chosen to ignore the chatter from Greece which is getting worse by the hour, and unlike recent days, have bought risk overnight based on one simple technical: of the five press conferences in ten Fed meetings held by Yellen as Chairman, the S&P finished higher 80% of the time. And that, in a world dominated by HFT "big data" statistics is all one needs to know to load the boat.
Here is Deutsche's preview of today's potentially quite historic FOMC meeting: "DB's Chief Economist Peter Hooper expects that we get no clear verbal signal pointing to a September liftoff tonight, but the Committee's economic projections and Yellen's message at the press conference will not be interpreted as inconsistent with that outcome. Peter notes that one important aspect of the meeting will be how upbeat the Committee sounds about economic developments in the opening paragraph of the statement as well as in Yellen's statement at the press conference. The message will be that things are gradually moving into place for liftoff, but without clear indication or suggestion that it will be September, particularly given the still significant data to come between now and then. Recent data supports a more upbeat tone relative to April, while housing numbers and the latest trade report support the view that the winter lull was largely transitory. On the inflation picture, Peter believes that although the level of prices is still significantly lower than the Fed eventually wants to see, this is no ...
SINGAPORE/LONDON/NEW YORK/TOKYO (Reuters) - A year on from the start of one of the biggest oil price crashes in history, the driving force behind the slide remains intact: there is still too much crude.
BRUSSELS (Reuters) - The euro zone economy returned to inflation in May, the European Union's statistics office Eurostat confirmed on Tuesday, as more expensive food, tobacco and services outweighed the impact of lower energy prices.
LONDON (Reuters) - Investors in most asset classes traded cautiously on Wednesday as they waited for a signal from the U.S. Federal Reserve on its first rate hike and whether the euro zone would pull another Greek rabbit out of its hat.
When the sell-off in German Bunds first got going, it looked like a temporary squeeze, with the largest position in the market - the ECB QE trade - coming under pressure after much weaker-than-expected Q1 GDP on 4/29.
However, as (Draghi mouthpiece) Goldman notes, there is something more than supply dynamics or ECB communications going on, as the Bundesbank (Buba) buying has fallen short of its purchases (in average maturity terms) from the very beginning. Goldman warns, ominously, this kind of signal - from the key hawk in the Eurosystem - has the potential to undercut the credibility of ECB QE, since it weakens the portfolio balance channel.
* * *
Goldman previously argued that the weak activity reading rattled a market that had been operating on a core thesis of strong US growth. The resulting uncertainty caused Bund yields and EUR/$ to rise, with the DAX also selling off on the day. Since then, something more ominous has come into play...
One clue has been the communications ping pong from the ECB. On May 18, Executive Board member Coeure said "the rapidity of the reversal in Bund yields is worrisome," citing it as another example of "extreme volatility in global capital markets."
ECB President Draghi sent the opposite message on Jun. 3, saying "one lesson is that we should get used to periods of higher volatility," followed on Jun. 10 by Executive Board member Coe ...
I believe I have the most accurate diagnosis for America, as well as the best solution. In a previous post (Diagnosis for America (Version 3)), I presented my diagnosis. In this post, I will present the solution. But first, let me briefly defend my diagnosis: self-serving career politicians who work for one paramount purpose: getting re-elected ad nauseam.
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