Central Bank Watch – Fed Tempers Rhetoric, Bank of Canada Ahead

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    Chinese press speculated that interest rates and the reserve requirement ratio could be cut in Q1.


    European Central Bank Chief Economist Lane repeated that rates need to reach a restrictive level and that the current 2.00% rate is close to neutral.You


    European Central Bank policymaker Villeroy de Galhau pushed back against yesterday’s report ECB looking to reduce size of its rate hikes at the policy meeting in March.

    He added #inflation is expected to return to target by 2025.


    Equity indices in the Asia-Pacific region ended Wednesday on a mostly higher note.

    Japan’s Nikkei: +2.5%,
    Hong Kong’s Hang Seng: +0.5%,
    China’s Shanghai Composite: UNCH,
    India’s Sensex: +0.6%,
    South Korea’s Kospi: -0.5%,
    Australia’s ASX All Ordinaries: +0.2%.


    China’s December FDI 6.3% (last 9.9%) o Japan’s November Core Machinery Orders -8.3% m/m (expected -0.9%; last 5.4%); -3.7% yr/yr (expected 2.4%; last 0.4%). November Industrial Production 0.2% m/m (expected -0.1%; last -0.1%) and Capacity Utilization -1.4% m/m (last 2.2%)
    New Zealand’s December Electronic Card Retail Sales -2.5% m/m (last 0.3%); 4.8% yr/yr (last 7.1%)
    The Japanese yen fell sharply against the dollar after the Bank of Japan maintained its ultra-loose policy against some expectations that the yield targets could be changed.
    The next Bank of Japan governor is expected to be named in early February.
    Taiwan’s GDP contracted by 0.9% in Q4 as exports fell 8.6% yr/yr.


    Major European indices trade in positive territory.

    STOXX Europe 600: +0.4%,
    Germany’s DAX: +0.1%,
    U.K.’s FTSE 100: UNCH,
    France’s CAC 40: +0.3%,
    Italy’s FTSE MIB: +0.5%,
    Spain’s IBEX 35: +1.0%.


    Eurozone’s December CPI -0.4% m/m (expected -0.3%; last -0.1%); 9.2% yr/yr, as expected (last 10.1%). December Core CPI 0.6% m/m, as expected (last 0.6%); 5.2% yr/yr, as expected (last 5.0%). November Construction Output -0.81% m/m (last 1.00%)
    U.K.’s December CPI 0.4% m/m, as expected (last 0.4%); 10.5% yr/yr, as expected (last 10.7%). December Core CPI 0.5% m/m (expected 0.4%; last 0.3%); 6.3% yr/yr (expected 6.2%; last 6.3%). December RPI 0.6% m/m (expected 0.7%; last 0.6%) and Core RPI 0.5% m/m (last 0.5%)
    Italy’s November trade surplus EUR1.445 bln (expected deficit of EUR1.800 bln; last deficit of EUR2.057 bln)
    European Central Bank policymaker Villeroy de Galhau pushed back against yesterday’s report that the ECB is looking to reduce the size of its rate hikes at the policy meeting in March. He added that inflation is expected to return to target by 2025.
    The British Chancellor of the Exchequer Hunt is reportedly planning to present a slimmed-down budget with no tax cuts in mid-March.
    The IMF’s chief economist said that the fund’s upcoming forecasts will be similar to the prior update.


    United Airlines (UAL 52.95, +1.75, +3.4%): beats by $0.33, beats on revs, remains confident in achieving pre-tax margin target of about 9% in 2023; guides 1Q23 EPS and revenue above consensus, guides FY23 EPS and revenue above consensus
    Charles Schwab (SCHW 84.40, +0.91, +1.1%): misses by $0.47, reports revs in-line
    PNC (PNC 155.00, -6.85, -4.2%): misses by $0.47, reports revs in-line
    J.B. Hunt Transport (JBHT 172.50, -3.79, -2.2%): misses by $0.52, misses on revs
    Microsoft (MSFT 240.48, +0.49, +0.2%) plans to announce layoffs today, according to WSJ
    Moderna (MRNA 205.23, +14.54, +7.6%): MRNA-1345, an investigational RSV vaccine, meets primary efficacy endpoints in Phase 3 trial in older adults


    Producer Price Index (PPI) fell 0.5% in December (consensus -0.1%) following a downwardly revised 0.2% increase in November (from +0.3%). Core-PPI, which excludes foods and energy, rose 0.1% in December (consensus +0.1%) after a prior revised 0.2% increase (from 0.4%).

    Retail sales fell 1.1% in December (consensus -0.8%) following a revised 1.0% decline in November (from -0.6%). Retail sales, excluding autos, fell 1.1% in December (consensus -0.5%) following a prior 0.6% decline (from -0.2%).


    Fed’s Hawk Bullard talking to @NickTimiraos says

    Fed should move ‘As rapidly as it can’ To over 5% and then react to data from there on
    Wants to err on the tighter side to allow disinflationary process to take hold
    Current policy “not quite” in restrictive territory, needs to be over 5% at least
    Fed wants to ‘guarantee’ inflation will be on a steady path back to target and not waver on that
    Last half of 2022 surprised to the upside on jobs and GDP
    Global economic factors have improved with easing recession risks in Europe and China moving towards reopening. But that could fuel inflation
    Core inflation hasn’t moderated as much as markets suggest
    Prospects for a soft landing “have improved markedly”
    Suggests a 50 bps at the upcoming meeting is appropriate


    The market is pricing in a 91% chance of a 25 bps hike so that comment about 50 bps is an outlier.

    It’s Bullard and he’s not a voter so I doubt the market puts much stock into his view.


    This week’s central bank main event was The Bank of Japan who kept the status quo sending the dollar yen up 300 pips putting a bid inequities and bond
    [See the full post at: Central Bank Watch – Fed Tempers Rhetoric, Bank of Canada Ahead]

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