monday march 6, · monday march 6, 2017 march 6, 2017 fed's kashkari speaks at nabe; jan....
TRANSCRIPT
Monday
March 6, 2017
March 6, 2017
Fed's Kashkari Speaks at NABE; Jan. Factory OrdersBy Ben Baris and Geoff King
What to Watch: The 33rd Annual National Association for Business Economics is held in Washington through March 7. This year’s economic policy conference
theme is “Recalibrating Policy for Sustained Growth.” Speakers include , Neel Kashkaripresident of the Federal Reserve Bank of Minneapolis, , CEO of Credit Tidjane ThiamSuisse Group AG, and Nobel Laureate .Joseph Stiglitz
Economics: Economists surveyed by Bloomberg forecast that January U.S. factory rose 1 percent from a month earlier, down from a 1.3 percent advance in orders
December, 10 a.m. Released concurrently, the final print of January durable goods is expected to show a 1 percent rise, down from 1.8 percent as initially reported. orders
The holds its first foreign-exchange swap auction as part of a $20 Bank of Mexicobillion hedge program meant to bolster the peso without draining international reserves.
Companies: PSA Group agreed to buy .’s unit in a General Motors Co Opeltransaction valued at 2.2 billion euros ($2.3 billion), creating Europe’s second-largest carmaker in a bid to better compete in the region’s saturated market.
Energy: returns to Houston with a focus on technology in the energy CERAWeekbusiness. ExxonMobil Corp. CEO Darren Woods will deliver the keynote address. Other speakers include Robert Dudley, CEO of BP, Ben van Beurden, CEO of Royal Dutch Shell, and oil ministers from Saudi Arabia, Iraq and Russia. Through March 10.
Markets: The was dragged down by miners and banks as Stoxx Europe 600 index Deutsche Bank announced it was reversing course with an overhaul to raise capital. The euro erased earlier gains and rose after former prime minister German bonds
said he won’t step in to replace on the Republican ticket Alain Juppe Francois Fillonin France’s presidential election.
(All times local for New York.)
Live chart on the Bloomberg .terminal
Commentary in This Issue
Friday's February jobs , and to reporta lesser extent February's CPI report, released the same day as the Fed's announcement on March 15, may be the only potential stumbling blocks to a rate hike this month: Bloomberg Intelligence economists.
Now that a March Fed interest-rate hike is close to fully priced, focus should shift to the possibility that the Fed ratchets up its for the projectionspeed and scale of the entire tightening cycle: Cameron Crise.
Federal Reserve Chair Janet Yellencapped a week of rising expectations about an imminent interest-rate increase by supporting a explicitlyhike in mid-March if U.S. economic progress persists.
Quote of the Day
"The sudden eagerness to pull forward the next move implies that the Fed now feels that it is getting too far behind the curve."
— Harm , chief U.S. economist at Bandholz
UniCredit Bank AG, in a report (link to
terminal)
Equities Data Monitor
Week Ahead
February Factory Orders Expected to Rise
Manufacturing output has hobbled along for several months and only recently registered a modest upward trend. It appears there is now some headway being made toward the elevated pace implied by the sentiment measures. Factory orders advanced 1.3 percent in December, resulting in an upbeat trend from year-ago levels. Consensus anticipates a 1 percent increase in factory orders for January, which seems likely given the 1.8 percent rise in the durable goods component.
— Richard Yamarone, Bloomberg Intelligence economist Source: Bloomberg. Updated at 5:40 a.m.
Economics 2 March 6, 2017
Week Ahead
Yellen Sets Jobs Bar Extremely Low for MarchBy Carl Riccadonna, Yelena Shulyatyeva and Richard Yamarone, Bloomberg Intelligence economistsA barrage of Fed comments in the last few days led the markets to price in a close-to-certain probability of a March rate hike. Fed Chair Janet Yellen supported her colleagues' calls for a rate increase "relatively soon," specifically mentioning the March meeting. A rate hike would be "appropriate" if employment and inflation continue to meet policy makers' expectations. Fed officials seem eager for further policy tightening now, while the global environment allows them to focus on domestic goals.
This leaves the February jobs report, scheduled for release on March 10, and to a lesser extent February's CPI report, released the same day as the Fed's announcement on March 15, as the only potential stumbling blocks to a rate hike this month. The recent indicators point to a strong payrolls print.
Net exports subtracted 1.70 percentage points from growth in the fourth quarter. The recent data indicate that dollar strength continues to take a toll on activity in the first quarter. The advance report on goods trade
indicated a significant deficit balancewidening in January, mainly on the back of rising imports, implying a continued drag from the sector in the first quarter. The increase in industrial supply goods imports signals a modest pickup in equipment investment in the quarter, which could help diversify economic growth away from consumption.
By most measures, the labor market appears to be strong. All of the employment components of the regional Fed surveys, including the ISM manufacturing and non-manufacturing reports, are in positive territory and signal favorable job creation. Similarly, the level of claims for unemployment benefits is lingering around multidecade lows. This is consistent with consensus for an increase of 185,000 for , softer than ADPthe 246,000 posted in January, but stronger than the fourth quarter average
Tuesday, March 7
Wednesday, March 8
View a more comprehensive week ahead preview on the Bloomberg .terminal
of 167,000, and 175,000 for all of 2016.
climbed 0.4 percent in Import pricesJanuary, the result of a 5.8 percent surge in fuel imports. Excluding petroleum, import prices fell 0.2 percent, and were unchanged from a year ago. Dollar strength has kept import-price inflation in check, and with the Fed looking to raise rates yet again, the currency's increased purchasing power should further cap the cost of imports. Consensus projects the headline to rise 0.1 percent in February.
Weekly , at the lowest jobless claimslevel since 1973, reflect labor-market tightness. Businesses are maintaining staff levels, rather than furloughing workers, as they remain optimistic about the near-term outlook. The claims data are encouraging, not just with respect to firing, but also because of improved hiring prospects. The scarcity of labor means that companies must provide better compensation for existing staff and, having exhausted internal labor reserves, hire more workers.
Initial claims dropped 19,000 to 223,000 in the week ended Feb. 25, the lowest reading since March 1973. Over the last year, claims have averaged 259,000.
While consumer optimism trends decisively higher, consumer spending ultimately depends on income, wealth and
Thursday, March 9
available credit. Income growth remains tepid, and consumers are cautious to releverage. Meanwhile, the Fed's Flow
have indicated an of Funds Accountsincrease in household assets due to recent home-price appreciation and stock-market gains. The rise in housing prices and stock market values from October to December suggest a roughly $2 trillion gain in household net worth in the fourth quarter.
Consensus expects nonfarm payrollsto return to a trend-like pace in February (190,000) following a 227,000 spike in January. However, the pace of hiring may be eclipsed by an apparent jump in wage pressures in February related to minimum-wage increases in several states at the start of the year. In January, an outsized drop in average hourly earnings in the financial sector offset rising wages in retail, leisure and hospitality and other services — sectors most impacted by a minimum-wage hike.
Increased economic optimism seems to be coaxing individuals to enter the labor market, resulting in higher participation — thus an increase in the unemployment rate to 4.8 percent in January. However, a rebound in household survey employment in February, which seems likely, could push the rate back to 4.7 percent.
Friday, March 10
Average Hourly Earnings to Rebound in February
Economics 4 March 6, 2017
Federal Reserve
Why Fed Dot-Plot Changes Could Upend Market RangesBy Cameron CriseFixed income markets have oscillated within a range all year as traders assess the probability of a March hike. Now that one is close to fully priced, focus should shift to the possibility that the Fed ratchets up its projection for the speed and scale of the entire tightening cycle.
If the Summary of Economic Projections moves toward projecting four hikes in 2017 and/or 2018, that could well be the catalyst to see bond markets break out of the established range and send 10-year yields careening toward 3 percent.
In their last statement, the FOMC characterized the risks to the outlook as "roughly balanced" — but this is untrue if one takes the perceived risks from the December SEP projections at face value.
I tabulated the perceived balance of risk to the Fed’s growth, employment, and core PCE inflation forecasts since the Fed began compiling them in 2011. The balance of risk was tilted to the upside for growth, employment, and inflation in the December SEP, a sentiment not reflected in recent statements.
Not only was December the first time in the history of the SEP that growth risks were tilted to the upside, but only one participant even thought that they might be to the downside.
There has been virtually nothing in the intervening months to weaken the upside risk to growth, and plenty to strengthen it — notably the improvement in the global outlook.
Why is all of this important? The Fed’s policy intentions have typically lagged their assessment of risks. If we look at a rolling two-year forward tightening projection from the dot plot, we can see that it tends to lag the evolution of the perceived growth risks by a quarter or two, and thus currently does not reflect
the uptick in optimism.Given the academics’ focus on the
decline in the natural rate of interest, there is no guarantee that the dot plot will follow the perceived growth risks higher to the degree suggested by the chart above.
Still, with only one dot needed to shift the median projection higher in 2018 and
2019, it’s not hard to see the SEP appearing hawkish this month — or the market reacting.
NOTE: Cameron Crise is a macro strategist who
writes for Bloomberg. The observations made are
his own and are not intended as investment
advice.
Data & Events
Will the Fed Tilt the Balance of Risk to the Upside?
Dot Plot Projections Lag Bullish Risk Assessment
Economics 5 March 6, 2017
Data & Events
TIME COUNTRY EVENT SURVEY PRIOR
8:00 Brazil Markit Brazil PMI Composite — 44.7
8:00 Brazil Markit Brazil PMI Services — 45.1
9:00 Mexico Consumer Confidence Index 68.6 68.5
10:00 Canada Bloomberg Nanos Confidence — 58.1
10:00 U.S. Factory Orders 1.00% 1.30%
10:00 U.S. Factory Orders Ex Trans — 2.10%
10:00 U.S. Durable Goods Orders 1.00% 1.80%
10:00 U.S. Durables Ex Transportation 0.10% -0.20%
10:00 U.S. Cap Goods Orders Nondef Ex Air — -0.40%
10:00 U.S. Cap Goods Ship Nondef Ex Air — -0.60%
13:00 Brazil Trade Balance Weekly — —
18:50 Japan Official Reserve Assets — $1231.6b
22:30 Australia RBA Cash Rate Target 1.50% 1.50%Source: Bloomberg. Surveys updated at 5:20 a.m. in New York.
Calendar
Click on the to see the full range of economists' forecasts on the terminal. highlighted releases
Overnight
The was wide open Dutch electiongoing into the last full week of campaigning, as support for the populist message of Geert Wildersdeclined and Prime Minister Mark
failed to pick up the balance. RutteWith showing five parties are pollsnow in contention to place first in the March 15 vote, leaders tried to capitalize on the opening over the weekend. Rutte touted his Liberal-led government’s economic record, while Wilders said it would be untenable to exclude his Freedom Party from a coalition if it scored highly.
Alain Juppe, a former prime minister who was defeated in the Republican party primary, said he won’t step in as a replacement candidate in France’s presidential election.
Investor confidence in the euro-area economy surged to the highest level since before the global financial crisis, suggesting the region’s recovery will continue to strengthen. An index measuring sentiment in the 19-nation region rose to 20.7 in March from 17.4 in February, Sentixsaid today in a statement. That’s the strongest reading since August 2007 and beats the median estimate of 18.5 in a Bloomberg survey. Gauges for current conditions and expectations both improved.
A measure of U.K. manufacturing output jumped to the most since 2013 this quarter as the pound’s slide bolstered demand and confidence climbed, according to a survey by industry group and advisers EEF
. BDO LLP surged, Export ordersfueled by sterling and a pickup in key overseas markets, the report published today said. Business confidence, which dropped in the wake of Britain’s vote to leave the European Union, rebounded to the highest since 2015.
Europe
Global Events Calendar
Treasury Bill Curve Inverts as Debt Ceiling Resurfaces
With just over a week until the Treasury needs to cap borrowing under what’s become known as the debt ceiling, investors are willing to pay more for bills maturing around the March 15 deadline to avoid being caught short of the securities. In order to shrink its cash balance to $25 billion, the amount during the last standoff, Treasury has started cutting the size of bill auctions. Because of the supply crunch, Treasury bills maturing March 16 and March 23 are yielding 0.390 percent versus 0.490 percent for the March 30 securities.
— Alexandra Harris, with assistance from Molly Smith
Economics 6 March 6, 2017
Global Events Calendar
By Phyllis Halliday, James Amott and John McCluskey
Employers in the U.S. probably added around
180,000 workers to payrolls in February,
economists forecast the government to report.
ECB President Mario Draghi is widely predicted
to leave interest rates unchanged and reaffirm a
pledge to continue asset purchases through the
end of 2017.
French President , Francois HollandeGerman Chancellor , Angela MerkelSpanish Prime Minister Mariano Rajoyand Italian Prime Minister Paolo
meet to discuss European Gentiloniissues ahead of this week’s EU summit. Starts at 18:00 (12:00 EST) in Versailles.
Swiss National Bank posts annual results. 07:25 in Zurich (01:25 EST).
U.S. factory orders (Jan.), ECONOMY: Taiwan foreign exchange reserves (Feb.), New Zealand building permits (Jan.), Australia retail sales (Jan.).
Britain’s upper, unelected House of Lords completes its scrutiny of the bill allowing Prime Minister Theresa May to trigger and will debate further Brexit amendments, having already made one change to the wording that means the draft law will have to go back to the lower chamber, the House of Commons. Starts at 11:00 in London (06:00 EST) and expected to conclude with a final vote in the evening.
Argentine unions hold a protest march in Buenos Aires. The unions are holding back from a full strike, showing a reluctance to break completely with the government.
Australian Prime Minister Malcolm heads to Jakarta for his second Turnbull
meeting with Indonesian President Joko within two weeks.Widodo
Australia rate CENTRAL BANKS:decision; Georgia rate decision.
U.S. trade balance and ECONOMY:consumer credit (Jan.), Canada trade balance (Jan.), Brazil GDP (4Q), Philippines CPI (Feb.), China foreign exchange reserves (Feb.), Taiwan
Monday, March 6
Tuesday, March 7
inflation and trade (Feb.), Hong Kong foreign exchange reserves (Feb.), Romania GDP (4Q), Slovakia GDP (4Q), Hungary GDP(4Q), Bulgaria GDP (4Q), Croatia GDP (4Q), South Africa gross and net reserves (Feb.) and GDP (4Q), euro-area GDP (4Q), Germany factory orders (Jan.), U.K. Halifax house prices (Feb.), Switzerland foreign-currency reserves (Feb.).
U.K. Chancellor of the Exchequer presents his first Philip Hammond
annual budget statement in the House of Commons. 12:30 in London (07:30 EST).
The Economist hosts its Argentina , bringing together government Summit
and business leaders to evaluate the country’s progress in 2016 and plan the year ahead. Begins at 08:00 in Buenos Aires (06:00 EST).
CENTRAL BANKS: Poland rate decision.
ECONOMY: U.S. MBA mortgage applications (weekly), ADP private employment (Feb.), productivity/labor costs (4Q final) and wholesale inventories (Jan. final), Russia CPI (Feb.), Brazil industrial production (Jan.), Chile inflation (Feb.), China trade (Feb.), Japan revised GDP (4Q), Hungary CPI (Feb.), South Africa business confidence index (Feb.), Turkey industrial production (Jan.), Germany industrial production (Jan.), Spain industrial production (Jan.).
. President Mario ECB rate decisionDraghi is widely predicted to leave interest rates unchanged and reaffirm a pledge to continue asset purchases through the end of 2017. The interest-rate announcement at 13:45 in Frankfurt (07:45 EST) is followed by Draghi’s press conference at 14:30.
German Chancellor Angela Merkelspeaks to parliament previewing the EU summit starting later in the day. Likely topics include Brexit and trans-Atlantic relations. 09:00 in Berlin (03:00 EST).
U.K. Brexit Secretary David Davisanswers questions in the House of
Wednesday, March 8
Thursday, March 9
Commons and is likely to comment on the House of Lords’ amendments to the government’s Brexit bill. 09:30 in London (04:30 EST).
Commonwealth trade ministers begin a two-day meeting with the U.K., which is pushing for greater trade links with its former colonies as it leaves the EU.
The Organization for Economic gives Cooperation and Development
its updated economic outlook. 11:00 CET (05:00 EST).
Britain’s independent Institute for issues its analysis of Fiscal Studies
Hammond’s budget announcement.
The U.S. Securities and Exchange holds a meeting of its Commission
investor advisory committee. In Washington at 09:30 EST.
Turkish President Recep Tayyip visits Moscow to meet with Erdogan
President .Vladimir Putin
CENTRAL BANKS: Peru rate decision.
ECONOMY: U.S. jobless claims (weekly), Bloomberg consumer comfort(weekly), import prices (Feb.) and household net worth (4Q), Mexico inflation (Feb.), China inflation (Feb.), Czech CPI (Feb.), U.K. RICS house prices (Feb.), Ukraine CPI(Feb.).
EU leaders, excluding U.K. Prime Minister Theresa May, discuss the way forward for the bloc amid . Starting Brexitfrom 09:15 in Brussels (03:15 EST).
ECONOMY: U.S. nonfarm payrolls (Feb.), unemployment rate (Feb.) budget statement (Feb.), Canada financial statistics (weekly) and unemployment (Feb.), Brazil IPCA Inflation (Feb.), Australia home loans (Jan.), Philippines trade (Jan.), Singapore retail sales (Jan.), China new loans, money supply (Feb.) to be released between March 10-15, Romania CPI (Feb.), Germany trade (Jan.), France industrial production (Jan.), Italy unemployment (4Q), Spain retail sales (Jan.), U.K. industrial production, trade (Jan.), inflation expectations (Feb.) and NIESR GDP estimate (Feb.).
Friday, March 10
Market Indicators
Economics 7 March 6, 2017
Market Indicators
Source: Bloomberg. Updated at 5:25 a.m. New York time.
Economics 8 March 6, 2017
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