Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:
Main Trading Event Of The Day: U.S. FOMC Economic Projections @ 18.00 GMT
WHAT WE’RE WATCHING TODAY
U.S Fed Economic Projections: Markets Watch for Faster Interest Rate Increases
The largest increase in core consumer inflation in almost three years has added fuel to market speculation that it will move faster to raise interest rates. The consumer price index climbed 0.4 percent in May from a month earlier, higher than expected and the biggest increase since February 2013. The annual increase was 2.1 percent, following April’s 2 percent year over year gain. Core CPI was up 0.3 percent, the biggest increase since August 2011. It is widely expected the Fed will announce that it will continue paring back its bond-buying program by another $10 billion, while emphasising that it sees the economy improving, but not sufficiently enough. Even if the Fed gives inflation a nod, the CPI is not its choice metric. While CPI has climbed over the Fed’s target of 2 percent inflation, the Fed also watches the PCE, the personal consumption expenditures price index.
Fed officials are also expected to cut their forecast for GDP, after a negative reading on first quarter GDP and their views of the unemployment rate, which was forecast at 6.1 to 6.3 percent by the fourth quarter, as it is already at 6.3 percent. This has led to the speculation the Fed could also show that the views of some officials have changed on when it will raise the Fed funds rate for the first time. Currently, the market believes the first move will be later in 2015, but expectations could change to earlier in the year if individual officials change their forecasts, and that could create volatility. U.S. FOMC Economic Projections today @ 18.00 GMT.
Shares Set To Rise As All Eyes On The Fed
European stocks were seen nudging higher on Wednesday, reflecting gains on Wall Street, although the rise was seen limited as investors wait for the U.S. Federal Reserve to conclude its policy meeting. The Fed is expected to cut another $10 billion from its monthly bond purchases, while investors will be watching for any comments on when the Fed would begin to raise interest rates and its outlook for the economy. Data released on Tuesday showed a surprisingly high reading for U.S. inflation, which sparked speculation of a hawkish tilt to the Fed’s policy outlook. Market watchers expect Britain’s FTSE 100 to open 12 points higher, or up 0.2 percent and Germany’s DAX to open around 17 points higher, or up 0.2 percent.
Disappointing Trade Data Casts A Shadow Over Japan
Official data reveals that Japan’s exports and imports declined in May, fuelling concerns about the outlook for the world’s third biggest economy, as it weathers an increase in the country’s consumption tax. May exports fell 2.7 percent from a year earlier, the first annual decline in 15 months, much worse than analyst expectations. Imports fell 3.6 percent on-year, compared with expectations for a 1.7 percent rise, bringing the trade balance to a deficit of 909 billion yen ($8.9 billion) in May. It remains to be seen whether Abenomics, the term used by analysts and commenters use to describe the economic policies of Japan’s Prime Minister Shinzo Abe, can stimulate domestic spending sufficiently to offset weak export demand. Part of that policy has been huge monetary stimulus to help weaken the yen and end deflation. Although the yen weakened about 22 percent against the dollar in 2013, its impact on exports has faded while the currency has strengthened almost 3 percent this year. The breakdown of the trade data showed that exports to Asia and the U.S. fell in May.
Japan raised its consumption tax in April for the first time in 17 years, with the tax rising to 8 percent from 5 percent. While consumers stepped up their spending ahead of the tax hike a slowdown in consumption after that is now weighing on economic activity. Japan’s markets showed little immediate reaction to the trade data. The benchmark Nikkei stock index rose 0.3 percent in early trade while the yen was little changed around 102.2 per dollar.
That sums up today’s highlights! Don’t forget, you can stay in touch via Facebook, Twitter, Google+ and LinkedIn for all the latest market updates. We hope you have a profitable day on the markets.
