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Rabu, 19 Juni 2019

Dow futures pause as investors await Fed meeting - CNBC

U.S. stock index futures were marginally higher on Wednesday morning, as investors wait to hear from Federal Reserve Chairman Jerome Powell.

Around 6 a.m. ET, Dow futures indicated a positive open of nearly 20 points. Futures on the S&P and Nasdaq were both slightly higher, too.

There's a special focus on the outcome of the Federal Reserve meeting Wednesday. Not only are traders are keen to understand the chances of rate cuts this year, but they are also interested to know if President Donald Trump has any influence on the central bank.

The U.S. president, when asked Tuesday whether he wants to remove Jay Powell from his position, said "Let's see what he does." This comes after a Bloomberg News report argued that the White House looked into demoting the chairman of the Fed back in February. Larry Kudlow, director of the National Economic Council, told reporters Tuesday that Trump is not planning to demote Powell, however.

Earlier in the day, President Trump had accused ECB President Mario Draghi of currency manipulation, after the latter's speech at a conference in which he suggested that the European Central Bank could provide more stimulus if inflation does not pick up in the euro zone. Draghi responded later saying the central bank's remit is clear. "Our mandate is price stability defined as a rate of inflation which is close to but below 2% over the medium term," Draghi said.

Meanwhile, President Trump also said he will be having an "extended meeting" next week with the Chinese leader at the G-20 meeting in Japan.

There are no data items to note Wednesday.

In terms of corporate earnings, Oracle and Winnebago will be updating investors.

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2019-06-19 06:08:31Z
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Dow futures modestly higher as investors await Fed meeting - CNBC

U.S. stock index futures were marginally higher on Wednesday morning, as investors wait to hear from Federal Reserve Chairman Jerome Powell.

At around 01:30 a.m. ET, Dow futures rose 10 points, indicating a positive open of more than 33 points. Futures on the S&P and Nasdaq were both slightly higher too.

The U.S. President, when asked Tuesday whether he wants to remove Jay Powell from his position, said "Let's see what he does." This comes after a Bloomberg News report argued that the White House looked into demoting the chairman of the Fed back in February. Larry Kudlow, director of the National Economic Council, told reporters Tuesday that Trump is not planning to demote Powell, however.

Meanwhile, President Trump also said he will be having an "extended meeting" next week with the Chinese leader at the G-20 meeting in Japan.

There are no data items to note Wednesday.

In terms of corporate earnings, Oracle and Winnebago will be updating investors.

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https://www.cnbc.com/2019/06/19/dow-futures-modestly-higher-as-investors-await-fed-meeting.html

2019-06-19 06:07:25Z
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Why Trump might end up regretting the rate cut he wants so badly - CNN

Trump has repeatedly bashed chairman Jerome Powell — his pick to lead the US central bank — accusing the world's most powerful central banker of damage because the Fed raised interest rates last year just as Republicans were goosing the economy with tax cuts. And on Tuesday, Trump even declined to rule out demoting Powell, instead saying that he would watch the chairman closely.

"I want to be given a level playing field. So far I haven't been," Trump said to reporters at the White House as he left for his re-election kickoff rally.

Powell has preached patience for the last several months when it comes to rate-setting policy. But as central bankers meet in Washington this week for their two-day policy meeting, they are faced with a host of challenges — including the possibility of a protracted trade war with Beijing, as well as recent signs of a slowing US economy.

Those concerns have saddled the Fed with a dilemma: When should it cut rates? And how quickly should it do so?

At their last meeting in May, Fed officials relayed a sense of relief that fears over a global economic slowdown had subsided in the wake of positive economic news from China, along with signs that tensions between Washington and Beijing seemed to be easing as negotiators worked steadily toward a deal.

But all of that has since been upended. Talks between the world's two largest economies came to a halt days after the Fed meeting, when the Trump administration claimed that China reneged on its trade commitments. US markets plunged as Trump threatened even more tariffs on China, and as businesses and investors grappled with uncertainty about how the trade war would end. Other threats from Trump of tariffs on Mexico, while short lived, added to the already tense climate.

That kind of anxiety, along with a mixed economic picture, has put the Fed in a precarious position as it tries to extend one of the longest economic expansions since the 2008 financial crisis.

"The goalposts have certainly shifted from the start of 2019, when there were two forecasted rate hikes," said Steve Rick, chief economist at CUNA Mutual Group. "Then, in March, we hit pause, and now we're talking about a potential cut."

Most economists don't think the Fed will change rates at all at this week's meeting, leaving the benchmark rate hovering between 2.25% and 2.5%. The central bank is probably waiting to make a move when it has a clearer picture of what direction the US economy is taking, along with what happens when Trump and China's President Xi Jinping talk trade later this month.

"We expect the main message from the June FOMC meeting to be that the committee will 'act as appropriate' to sustain the expansion," Michael Gapen, chief economist at Barclays Investment Bank wrote in a note to clients. "We look for the committee to signal a preference for 'flexibility' over 'patience' when assessing incoming information."

It's unclear how the US-China trade discussions will unfold. In the latest twist, Trump on Tuesday tweeted he had a "very good" telephone conversation with Xi, and that the two leaders would have an "extended meeting" later this month at the Group of 20 leaders summit in Osaka, Japan.

While the Fed likely will leave things as they are this week, the probability of a rate cut shoots up next month and throughout the remainder of the year, according to the CME FedWatch tool. Powell also sent US markets higher earlier this month after he said that policy makers would "act as appropriate" to sustain the economic expansion — remarks that Wall Street interpreted as a sign the Fed would cut rates if needed.

In any case, if policy makers cut rates in the coming months, experts warn it won't signal a healthy prognosis for the US economy.

"The Fed taking such an action would imply considerable economic weakness than they had been expecting just a few months earlier," said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics and a former visiting associate director for the division of monetary affairs at the Fed. "I can't see how it would be viewed as good news."

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2019-06-19 04:01:00Z
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Selasa, 18 Juni 2019

Europe just gave the dollar a boost. Here's why Trump hates it - CNN

European Central Bank President Mario Draghi said in a speech that he was open to boosting monetary stimulus if economic conditions in Europe don't improve. That could mean interest rate cuts or the revival of a quantitative easing program that involves creating new money to buy assets such as government bonds.

"In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required," he said in Sintra, Portugal.

Draghi's remarks sent stocks higher and drove the euro down as much as 0.3% against the US dollar.

They also provoked a reaction from Trump, who complained on social media that the weaker euro made it "easier" for Europe to "compete against the USA."

"They have been getting away with this for years, along with China and others," Trump said on Twitter, referring to Europe.

For Trump, the weakness of other currencies compared to the US dollar has been a frequent source of frustration. The president has long argued that China devalues its currency, the yuan, to make its exports more competitive.

At the same time, Trump has made clear that he wants a weaker US dollar. He has railed against Federal Reserve interest rate rises that have bolstered the greenback by making it more appealing to foreign buyers.

Currency war?

Jane Foley, a senior foreign exchange strategist at Rabobank, said that while Trump has "no issue" with making statements designed to weaken the dollar, such comments can be dangerous.

"Any economy that is suffering from a prolonged bout of undesirably low inflation is likely to favor a weak currency," Foley said in a research note. "If several economies find themselves in the same boat coincidentally, the prerequisite conditions for a currency war are set."

A currency war would see countries competitively slash the value of their money in order to gain an advantage on trade.

If the ECB does cut rates or resume quantitative easing, it would mark a dramatic shift.

Draghi, who will leave the central bank in October, had recently struck a more hawkish tone.After a policy meeting two weeks ago, he said that the ECB would hold rates until at least the middle of 2020.

"Draghi's comments appeared vigorously dovish and stand in high contrast to what he conveyed just earlier this month," FXTM market analyst Han Tan said in a note Tuesday.

But it's getting increasingly difficult for Draghi to maintain the status quo as signs of weakness in leading European economies pile up.

Mario Draghi saved the euro. His replacement also faces a daunting task

The ECB predicts that growth in the 19 countries that use the euro will slow to 1.2% this year from 1.8% in 2018. The forecast reflects ongoing concerns about Britain's potential departure from the European Union, and the negative effect of rising global trade tensions.

The latest piece of bad news came Tuesday, when Germany's ZEW indicator for economic sentiment plummeted far below expectations for June. It's now at its weakest since November.

The big problem for the European economy is that central bankers have limited ammunition.

Unlike the Fed, which has been raising rates in line with stronger US economic growth, the European Central Bank has held rates at record low levels. And the central bank only ended its huge bond purchase program in December after creating €2.6 trillion ($2.9 trillion) in new money.

Government bond yields dropped sharply in Europe following Draghi's comments on Tuesday. Lower yields, which move opposite prices, typically highlight investor concerns about economic growth.

The yield on Germany's benchmark 10-year bond dropped further into negative territory, hitting a new record low. The yield on France's 10-year bond briefly turned negative as well.

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2019-06-18 14:27:00Z
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Facebook's cryptocurrency chief says if you don't trust our digital wallet use our competitors - CNBC

An executive behind Facebook's venture into cryptocurrency told CNBC on Tuesday that consumers shouldn't be worried about the social media network gaining access to their financial data.

"To earn people's trust, we are going to have to make strong commitments on privacy," said David Marcus, the head of Facebook's Calibra division, a newly announced subsidiary to host a digital wallet by the same name for storing and exchanging the digital coin called Libra.

"If people don't want to trust us, they can use any of the other wallets that will be available," Marcus said in a "Squawk Box " interview. "There will be plenty of competition."

At a time when it is trying to rebuild user trust after data privacy and security scandals, Facebook announced Tuesday an ambitious endeavor to create Libra and launch it in the first half of 2020.

The goal — using blockchain, the technology underlying bitcoin on other cryptocurrencies — is to make it as easy to send money across the world as it is to send a photo. But unlike bitcoin and others, Libra will be backed by more stable government-backed money.

The Libra currency will not be run by Facebook, but rather by a nonprofit association supported by a range of companies and organizations.

"We painstakingly removed ourselves from governing this network," said Marcus, the former PayPal president whom Facebook hired in 2014 to lead its Messenger app.

The Calibra digital wallet will be the way Facebook eventually makes money through financial services such as loans. However, Marcus said those add-ons won't happen anytime soon.

Marcus said the latest venture is "very close" to Facebook's mission of connecting people across the world. People in the U.S. are privileged when it comes to having a stable currency and trusted institutions, he said. "But that's not the case for many people across the world."

He said the new currency would lower the barrier for cross-border payments.

"We felt it was time to try something new, and this is the beginning of a long journey in launching this new network," Marcus said. Other cryptocurrencies are "investment vehicles or investment assets rather than being a great medium of exchange. [Libra] is really designed from the ground up to be a great medium of exchange, a very high quality form of digital money that you can use for everyday payments."

Shares of Facebook opened Tuesday's trading up 2.3%, after soaring more than 4% to $189 per share on Monday ahead of the announcement. The stock has gained 44% this year.

Libra is backed by other payment companies, including Visa and PayPal and tech giants eBay, Lyft, Spotify and Uber. The 27 companies in total each will be expected to invest a minimum of $10 million to fund the project, according to The New York Times.

Reports speculating about the Facebook news over the past few weeks helped boost the price of bitcoin. The world's biggest digital coin jumped across the $9,000 level on Sunday, on the thought that Facebook's entry in crypto would add legitimacy to the industry. Bitcoin gained ground Monday as well, but slipped some in Tuesday trading.

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2019-06-18 13:31:54Z
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Dow rallies 300 points on trade optimism - CNN

President Donald Trump tweeted to inform the public about a "very good telephone conversation" with Chinese Premier Xi Jinping. He said the two leaders would meet at the G20 summit in Japan next week.

Trump previously said that China would face additional import tariffs if Xi didn't show up to the summit.

That gave stocks a boost. The Dow (INDU) rallied 1.3%, or 345 points, while the S&P 500 (SPX) and the Nasdaq Composite (COMP) popped 1.2% and 1.8%, respectively. European stocks also traded in the green.

For the month, the Dow and the S&P are up 6.6% and 6.3%, respectively. The Nasdaq is on track for a 7.1% jump this month. At this point, June is the best month for stocks since January.

Earlier in the day, European and Asian stocks had started to climb, after European Central Bank President Mario Draghi hinted there could be more monetary easing in the eurozone to boost the economy. US stock posted a stronger open in response.

Eurozone growth has been lagging for a while now, but having a stimulus commitment of the ECB is taking the edge off recession risk.

The euro, on the other hand, isn't taking the news so well and is down 0.1%, buying $1.1200. Currencies tend to strengthen in a higher interest rate environment. This was one of the key drivers behind US dollar strength last year.

President Donald Trump tweeted about the euro move, saying the dip in the euro was making it unfairly easier for European exports to compete with US exports.

"This week is supposed to be all about the Fed, but before Chairman Powell will have the opportunity to deliver a dovish message on Wednesday evening, ECB President Draghi has moved the markets by signaling that the eurozone could soon see a fresh dose of monetary policy stimulus," said Jane Foley, senior FX strategist at Rabobank, in a note.

The Federal Reserve is kicking off its two-day meeting today, before it culminates in the monetary policy update and press conference tomorrow. With expectations for an interest rate cut in July at 88%, up from 86% yesterday, according to the CME FedWatch tool, investors will be watching Fed Chairman Jerome Powell's language when he talks about future policy strategy.

Market participants expect him to be careful with his wording, but that the word "patient" — which he introduced at the beginning of the year to describe the central bank's approach to future policy decisions — will disappear.

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2019-06-18 13:56:00Z
CAIiECfCLwXYWLyYKciw8uxGqpoqGQgEKhAIACoHCAowocv1CjCSptoCMPrTpgU

Federal Reserve may lose 'patience' on Wednesday - Yahoo Finance

Will the Federal Reserve message that it is no longer “patient” at the conclusion of its Federal Open Market Committee meeting on Wednesday?

The semantics behind the word “patient” have been dissected since Fed Chairman Jerome Powell first deployed the word in the Fed’s January 31 meeting, when policymakers flipped dovish and softened their stance on wanting to raise interest rates to the economy’s “neutral” level.

Powell’s “pause” hinted that the Fed was still leaving rate hikes on the table.

But building trade tensions and lackluster economic data has pushed some Fed officials to publicly acknowledge the case for a rate cut. And expectations for the Fed to drop its “patient” language, in addition to one or two dissenting votes, could make the June meeting the tipping point for the “pause” to turn into a full stop.

Wall Street is expecting the FOMC to keep rates steady at the current target range of 2.25% to 2.5%, but Powell’s commentary — in addition to the dot plots scheduled for release — will be increasingly in view as markets try to decipher the degree of dovishness as the Fed flips more neutral.

Flexible?

Goldman Sachs wrote June 14 that the Fed is likely to drop the word “patient,” and Barclays predicted that the Fed will replace the word “patient” in the FOMC statement with “flexible.”

“[W]e think the word ‘patient’ in the FOMC statement has served its useful life,” Barclays wrote June 13. “In our view, retention of ‘patient’ would likely sound too hawkish to markets that are already pricing easing in July and around 100 [basis points] of easing over the next four quarters.”

FILE PHOTO -- Federal Reserve Governor Lael Brainard delivers remarks on "Coming of Age in the Great Recession" at the Federal Reserve's ninth biennial Community Development Research Conference focusing on economic mobility in Washington, DC, U.S. on April 2, 2015. REUTERS/Yuri Gripas/File Photo

Key Fed officials have already hinted at the possibility of easing policy. On June 4, Powell sent markets higher after he delivered prepared remarks promising to “act as appropriate to sustain the expansion,” referring to the downside risks of the trade spat between the U.S. and China. In May, trade discussions broke down and the U.S. increased tariffs on about $200 billion worth of Chinese imports from 10% to 25%. The administration has threatened another round of tariffs, on an additional $300 billion worth of goods.

Fed Governor Lael Brainard echoed Powell’s comments in an interview with Yahoo Finance the day after.

“Trade policy is definitely a downside risk to the economy, and our job is to sustain the expansion,” Brainard said on June 5. “And we’ll need to see going forward what that means for policy.”

Although neither Powell nor Brainard committed to explicitly lowering rates, their stated commitment to extending the U.S. expansion reflects the acknowledgement of downside risks to the economy.

The Fed’s softer tone also comes amid weaker economic data since the Fed’s last meeting on May 1. The jobs report for May missed estimates on payroll gains, and tepid wage growth pointed to a labor market that may be running below full employment. Inflation, which has consistently run below the Fed’s 2% target, also remains a conundrum for policymakers worried about slowing economic activity.

A dissent, or two

Abandoning the “patient” language may open the door to future rate hikes, but the June meeting may also see explicit calls from some voting members to cut rates.

St. Louis Federal Reserve Bank President James Bullard speaks at a public lecture in Singapore October 8, 2018. REUTERS/Edgar Su

St. Louis Fed President James Bullard and Chicago Fed President Charles Evans, both voting members of this year’s FOMC, could dissent if the majority of the committee decides to keep rates steady. If that happens, those would be the first dissents since Jerome Powell took over as chairman in February 2018.

Goldman Sachs and UBS wrote that they would expect Bullard to dissent if the Fed opts to hold rates steady, instead preferring that the central bank move to lower rates.

Earlier in the month, Bullard had said a rate cut would be warranted “soon” due to “too low” inflation expectations. Bullard has pointed to the rate cuts of 1995 and 1996 to illustrate the Fed’s ability to provide some “insurance” ahead of a possible slowdown.

“The Fed has done this correctly once,” Bullard said June 3.

Chicago Fed President Charles Evans, also a voting member, is a possible dissenter as well. On June 5, Evans told Bloomberg that low inflation could be a “reason for a little more accommodation.”

Although not uncommon (Yellen faced 15 dissents in her four years as chair), a dissent or two on Wednesday would signal the beginnings of an explicit tilt toward easing policy.

Most of Wall Street expects the Fed to point to a rate cut in July, but markets are pricing in a non-zero chance of a rate hike this Wednesday. As of Monday afternoon, Fed funds futures contracts were pricing in a 19.2% chance of a rate cut this week.

—

Brian Cheung is a reporter covering the banking industry and the intersection of finance and policy for Yahoo Finance. You can follow him on Twitter @bcheungz.

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2019-06-18 12:56:00Z
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