Fed rate hike seen certain - 15.3.2017

US stocks fall ahead of Fed decision

US stock indices retreated on Tuesday led by declines in energy and airlines shares as oil prices slipped and flights were cancelled due to a snowstorm in North East. The dollar strength continued with traders awaiting the interest rate decision as the Fed concludes its policy meeting on Wednesday: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, closed 0.3% higher at 101.719. Dow Jones industrial average closed 0.2% lower at 20837.37 led by Chevron and General Electric shares. The S&P 500 lost 0.3% settling at 2365.45. The Nasdaq index fell 0.3% to 5856.82.

Investors expect the Federal Reserve will raise rates today: fed funds futures are pricing in a 91% probability that the Fed will move to hike rates 0.25 percentage points, according to data from the CME Group’s FedWatch tool. Equally important for investors is the indication what is policy makers’ expectations for the number of rate hikes central bank plans to implement this year which will be reflected in the chart known as a dot plot to be released with the central bank statement. Last dot plot showed policy makers projected three rate hikes this year but persistent strength of US economy and inflation above the Fed’s target 2% rate have raised the likelihood of more than three rate hikes as policy makers opt for a faster pace of rate hikes to combat inflation. Data yesterday showed higher than expected increase in producer prices in February at 0.3% bringing year-over-year wholesale inflation to 2.2%. Today at 13:00 CET Mortgage Applications will be released in America. At 14:30 CET February Consumer Price Index and Retail Sales will be published, the tentative outlook is negative for dollar. At 16:00 CET January Business Inventories will be released, the outlook is positive. And at 20:00 CET Federal Reserve interest rate decision will be announced, followed by Yellen’s press conference at 20:30 CET..

Nasdaq

European stocks slide ahead of Fed’s interest rate decision

European stocks closed lower on Tuesday following three consecutive sessions of gains as energy shares fell and investors were cautious ahead of Federal Reserve policy meeting. Both the euro and British Pound weakened against the dollar. The Stoxx Europe 600 fell 0.3%, while Germany’s DAX 30 slipped 1.2 points to 11988.79. France’s CAC 40 underperformed losing 0.5% and UK’s FTSE 100 ended down 0.1% at 7357.85..

Higher political uncertainty in European Union also weighed on investors risk appetite ahead of the general election in the Netherlands today where a strong vote for anti-EU far right Party of Freedom may indicate higher chance of victory for anti-EU presidential candidate Marine Le Pen in France’s elections in April. The centrist front runner in the French presidential campaign Francois Fillon was charged with misuse of public funds on Tuesday for allegedly using public funds to pay his wife and children salaries for phony jobs. In economic news German economic sentiment expectations improved in March according to the ZEW survey results, though not as much as expected. Today At 10:30 CET job market data will be released in UK. The tentative outlook is neutral for Pound. At 12:00 CET euro-zone employment data will come out, the outlook is neutral for euro.

Asian markets follow Wall Street lead

Asian stocks are lower today in thin trading as investors await Federal Reserve’s interest rate decision. Nikkei closed 0.2% lower at 19577.38 as yen strengthened against the dollar. Toshiba shares plunged 12% on news the company is considering a bankruptcy filing for its troubled US nuclear affiliate Westinghouse Electric Company and the Tokyo Stock Exchange placed Toshiba’s shares under special supervision. Chinese stocks are marginally higher after Premier Li Keqiang said China aims to cut taxes and fees for companies by 1 trillion yuan ($144.65 billion) this year: Shanghai Composite Index is 0.08% higher while Hong Kong’s Hang Seng Index is down 0.05%. Australia’s All Ordinaries Index is up 0.27% with the Australian dollar edging higher against the dollar.

Oil prices slip ahead of inventory data

Oil futures prices are edging lower today despite the American Petroleum Institute report US stockpiles fell 531 thousand barrels. May Brent crude contract closed 0.8% lower at $50.92 a barrel on London’s ICE Futures exchange on Tuesday. Prices fell yesterday after a monthly report from the Organization of the Petroleum Exporting Countries released Tuesday showed an increase in Saudi Arabia February output over previous month. Today at 16:30 CET the Energy Information Administration will release US Crude Oil Inventories.