News / Analysis
Finance Update – FED on the FenceJune 11, 2020
Americas – No News Sinks Markets
The US dollar added over half a percent after the US Federal Reserve’s Open Markets Committee decided to basically ignore news of the economy’s entry into a recession in February.
Indexes, on the other hand, had a much harder time with the policy statement, DJ futures now down 2%.
FED head Powell said the bank would continue to use its “tools to do whatever we can for as long as it takes to provide some relief and stability to ensure that the recovery will be as strong as possible.” He also said he expects the 2nd quarter decline to be the “most severe on record.”
The FED expects to continue buying treasuries at the current pace and inflation to increase by 1.2% this year – half the year before.
Yesterday’s CPI for May settled at 0.1% YoY – a third the month before, but May’s mortgage applications increased by 9.3%, after May’s 3.9% contraction.
Asia – Asia Follows the Leader
Asian indices are all in the red this morning, led by Australia’s ASX (-3.13%).
The Nikkei is down 2.68%, and the Hang Seng -1.62%Australia’s Consumer Inflation Expectation number for June fell a tick to 3.3%, while electronic card retail sales in New Zealand expanded by 79% in May (MoM) after April’s 47% contraction.
Europe – EU Ready to Back Down
European Central Bank Vice President Luis De Guindos said yesterday that he expects the European economy to “bounce back” in the 2nd half of this year. Bank board member Isabel Schnabel concurred, saying further bond buying was unnecessary.
European indexes ended in the red last night led by Austria’s ATX, which lost 2.62%.
The FTSE seems the least scathed, with a mere 1/10th% drop. The GBP lost 0.8% overnight after the RICS House Price Balance index fell another disappointing 32% to a 10-year low.
Yesterday, Brexit EU negotiator Michel Barnier said that the UK was refusing to compromise on key issues, even though the EU was prepared to concede on its “level playing field” requirements.
Commodities – Oil Plunges on Build
Oil was down 4.14% overnight after the EIA confirmed the API build with a 5.7mB uptick.
Bitcoin continues its gradual 3-month uptrend, having added 36% since the year began and breached the 10k mark momentarily yesterday after the US FED’s policy statement.
AlphaPoint VP Scott Bambacigno told CoinDesk that “The Fed can ‘print money’ but they cannot ‘print jobs’.
Assets like gold and bitcoin should do well if the economy continues in this direction.” Gold also added a percent during the Asian session and is now near the top of its narrowing 2-month range.
Corporate – Hertz Delisted
Today’s big news from the corporate world is Hertz’s delisting notice from the NYSE following its bankruptcy call last month.
Shares closed down 39.7% after losing 24.4% the day before! Johnson & Johnson was up 1.26% after announcing it would begin human trials on an anti-COVID vaccine in July.
And Zoom is up 7.6% after shutting down a US-based group of Chinese activists commemorating the anniversary of the Tiananmen massacre. Company head Eric Yuan sent out an email explaining the move by declaring that the company expects its users “to comply with their respective local laws,”
|08:00 AM GMT||Italy||Industrial Output|
|12:30 PM GMT||US||Industrial Output, PPIs & Jobless Claims|
|10:30 PM GMT||NZ||House Prices & Business PMI. Food Price index at 10:45|
|04:30 AM GMT (+1)||Japan||Industrial Production|
|06:00 AM GMT||UK||Trade Balance, Industrial & Manufacturing Production, & GDP|