Financial and Economic News Update
European equity markets down; Apple cheers Wall Street: Most stock markets in European lost in trade today amidst continued uncertainty in Greece. U.S. stock index futures were pointing to a higher open after Apple Inc. (NASDAQ:AAPL) posted stellar fourth quarter results after the close of trading on Tuesday. The tech giant’s top-line and bottom-line, both beat Wall Street expectations. On the economic front, all eyes will be focused on the Federal Open Markets Committee statement, slated to be out at 2 p.m. ET. After the closing bell, Facebook Inc (NASDAQ:FB) and Qualcomm, Inc. (NASDAQ:QCOM) will report their quarterly numbers.
Oil trading lower after weak inventory data: Brent crude oil prices slumped to $49 a barrel after data from the American Petroleum Institute showed that U.S. crude supplies rose 13 million barrels last week. Analysts were expecting a reading of 3.5 million barrels. The official U.S. inventory data is due later today. Oil prices are down close to 60 percent since last summer, which has led to a string of investment bank forecast downgrades. Barclays was the latest to join the list, which on Wednesday, cut it Brent outlook to $44 from $72, and its WTI projection from $66 to $42.
Gold prices slip: Gold prices fell in trade as investors preferred to stay on the sidelines ahead of the FOMC statement. Bullion was trading in a tight range around the $1290 an ounce mark. If the Fed comes up with some surprise, support would come in at $1272, while any fresh bout of buying could take the metal to $1309. Separately, a Reuters poll showed that if the U.S. does decide to raise its interest rates this year, gold prices could fall for the third consecutive year in 2015.
Dollar up against most currencies: The dollar gained against the euro and the Japanese yen, recovering some of the prior session’s steep losses. Traders eagerly await the release of the results of the U.S. Federal Reserve’s policy meeting. Most analysts expect no major surprises from the FOMC statement, but also warn that any caution from the Fed on its guidance for interest rates could lead to short-term weakness in the dollar. The market is also focused on U.S. GDP data, to be released on Friday.
Bond Market News
Yields on U.S. 2-year notes stay above 0.5%: Yields on two-year notes yields managed to stay above 0.5 percent on market expectation that the U.S. Federal Reserve in on course to raise its interest rate later this year. The U.S. will sell $26 billion of two-year debt today. Shorter maturity notes have lagged behind long bonds this month. According to Bank of America Merrill Lynch indices, 2-year debt has returned 0.4 percent this month, compared to 7.4 percent for 30-year bonds.
U.K. 10-year bonds holding gains: U.K. 10-year bonds were steady after the country’s Debt Management Office sold 3 billion pounds ($4.6 billion) of ultra long dated inflation-linked gilts. The gilts, due in March 2058, sold at a price to yield 1.75 basis points higher than the 0.375 percent index-linked bonds maturing in March 2062. In related news, Bank of England’s chief economist Andrew Haldane said that the central bank was in no rush to raise interest rates. The BOE’s benchmark interest rate has remained at a record low of 0.5 percent since March of 2009.
Chinese swap rates rise to highest in 2 weeks: Chinese one-year interest-rate swaps climbed to their highest in two weeks amid speculation that the People’s Bank of China will only look to stabilize, and not lower, funding costs. The cost of one-year swaps touched an intraday high of 3.34 percent, the highest since January 13. The PBOC completed 60 billion yuan ($9.62 billion) of reverse-repurchase operations on Tuesday to meet the expected increase in demand for cash, ahead of the Lunar New Year holidays.
Survey shows bond investors most bullish in 8 weeks: A J.P. Morgan Securities survey showed that the number of investors, bullish on longer-dated U.S. Treasuries, was at its highest since early December. Growing concerns about the pace of global growth, and the recent weakness in Wall Street, has spurred interest in 30-year Treasury bonds, whose yields clocked a string of record lows.
Bank of Japan to meet bond traders more often: The Bank of Japan said that it will meet with bond market participants more regularly to acquire their views on how the bank can smoothly acquire government debt under its quantitative easing program. BoJ’s government bond purchases are so large that institutional investors are often left out of the market. The central bank wants to be more inclusive, and will hold a series of meetings with bond traders, according to a statement released today.
Greek bonds plunge as new government takes office: Greek bonds declined for the third straight session as new Prime Minister Alexis Tsipras prepares to loosen the terms of the 240 billion euro ($273 billion) international bailout. Concerns also grew after the new government questioned EU’s move to impose more sanctions on Russia. The yield on three-year notes jumped to their highest level today since the country completed its debt restructuring in 2012.
- US: Dow Futures: 17397.00 (0.11%), S&P 500 Futures: 2035.50 (0.27%), NASDAQ Futures: 4219.00 (1.03%)
- Europe: CAC: 4606.80 (-0.38%), DAX: 10666.34 (0.36%), FTSE: 6799.50 (-0.18%).
- Metals: Gold: 1288.20 (-0.27%), Silver: 18.045 (-0.22%), Copper: 2.4651 (0.06%)
- Energy: U.S. Crude: 45.30 (-2.01%), Brent Crude: 49.25 (-0.71%), Natural Gas: 2.905 (-2.55%)
- Commodities: Corn: 3.902 (0.58%), Soya Bean: 9.910 (0.76%), Wheat: 5.417 (0.93%)
- Currency: EUR/USD: 1.1348 (-0.28%), GBP/USD: 1.5201 (-0.01%), USD/JPY: 117.7900 (-0.02%)
- 10-year US Treasury: 1.8076% (-0.017), German 10-Year Yield: 0.377% (-0.009), Japanese 10-Year Yield: 0.289% (-0.006)
Economic Calendar for Wednesday, January 28, 2015:
07:00 A.M. ET: MBA Mortgage Applications (January 23)
10:30 A.M. ET: EIA Crude Oil Stocks Change (January 23)
11:30 A.M. ET: 2-Year Floating Rate Note Auction
01:00 P.M. ET: 2-Year Note Auction
02:00 P.M. ET: Fed Interest Rate Decision
02:00 P.M. ET: Fed’s Monetary Policy Statement