China's central bank will continue to improve its policy framework, which involves the use of both monetary tools and macro-prudential regulation to address risks while supporting growth.
Senate Panel Approves Tax Plan as GOP Leaders Gird for Fight (BBG) U.S. towns, cities fear taxpayer revolt if Republicans kill deduction (Reuters) After House Victory, Tax-Overhaul Fight Now Goes to Senate (WSJ) Analysts flee Wall Street with gallows humor as research changes loom (Reuters) Tesla Unveils ‘World’s Fastest Production Car’ and Electric Big Rig (BBG) Bitcoin Emerges as Crisis Currency in Hotspots (BBG) Ivanka Trump and the fugitive from Panama (Reuters) Murdoch Empire in Play as Suitors Line Up for 21st Century Fox Assets (WSJ) Franken Case Puts Both Parties in Bind on Misconduct Response (BBG) Crime Wave Engulfs Sweden as Fraud, Sexual Offenses Reach Record (BBG) Google Has Picked an Answer for You—Too Bad It’s Often Wrong (WSJ) Saudi Arabia swapping assets for freedom of some held in graft purge: sources (Reuters) Metal recyclers prepare for electric car revolution (Reuters) Despite Big Push From Beijing, Electric Cars Struggle in China (WSJ) Harvard’s Days as the World’s Richest School May Be Numbered (Reuters) Sears Dials Up Discounts to Record Levels as It Copes With Slump (BBG) Zimbabwe's Mugabe Makes First Public Appearance Since Military Takeover (WSJ) Hassett Bets on 3% U.S. Growth That Summers Sees in Fairyland (BBG) Two Weeks of Frenzied Negotiations Led to Bank-Relief Deal (WSJ) Overnight Media Digest WSJ - The House of Representatives passed a bill that would usher in the most far-reaching overhaul of the U.S. tax system in 31 years, a plan that would reduce the corporate tax rate to its lowest point since 1939 and cut individual taxes for most households in 2018. on.wsj.com/2j1JjUr - New suitors are circling Twenty-First Century Fox Inc , affirming that the media empire built by Rupert Murdoch is now in play. Comcast Corp has approached the media company. Verizon Communications Inc and Sony Corp are also kicking the tires. on.wsj.com/2j0i38O - A federal judge declared a mistrial in the corruption trial of U.S. Sen. Bob Menendez, giving the Democrat a political lifeline and preserving his party's control of the seat for the near future. on.wsj.com/2j1LebB - Meredith Corp has made a takeover bid for storied magazine publisher Time Inc in the range of $17 to $20 a share, according to people familiar with the situation. on.wsj.com/2j0Ht6p - An activist investor in Barnes & Noble Inc has proposed a transaction that would take the bookseller private with the help of current shareholders and a hefty dose of borrowings, an effort that could face formidable obstacles. on.wsj.com/2j0EvP6 - Emerson Electric Co boosted its takeover offer for Rockwell Automation Inc, ratcheting up an effort to bring its reluctant rival to the negotiating table and forge a new giant in industrial automation. on.wsj.com/2j21qd2 NYT - With 227 Republican votes, the House passed the most sweeping tax overhaul in three decades on Thursday as U.S. lawmakers seek to enact $1.5 trillion in tax cuts for businesses and individuals and deliver the first major legislative achievement of President Donald Trump's tenure. nyti.ms/2hDqQRs - The cable company Comcast Corp is in preliminary talks to buy entertainment assets owned by Twenty-First Century Fox Inc, including a vast overseas television distribution business. nyti.ms/2hxkbof - Tesla Inc has aimed to reinvent the automobile and the way electricity is generated for homes. In a presentation by its chief executive, Elon Musk, Tesla unveiled a prototype for a battery-powered, nearly self-driving semi truck that the company said would prove more efficient and less costly to operate than the diesel trucks that now haul goods across the country. nyti.ms/2zJPgzU - The senior American diplomat at the United Nations climate talks in Germany told world leaders on Thursday that the United States would remain engaged in global climate change negotiations even as it planned to exit the Paris agreement "at the earliest opportunity." nyti.ms/2ySE1Bd - The Federal Communications Commission voted on Thursday to allow a single company to own a newspaper and television and radio stations in the same town, reversing a decades-old rule aimed at preventing any individual or company from having too much power over local coverage. nyti.ms/2zN7YpA Britain The Times * Prudential Plc is scaling up its ambitions in Asia with plans to open a fund management venture in China and to double in size in the region every few years. bit.ly/2jxRjAk * WPP said it was prepared to increase its stake in Asatsu-DK, one of the largest marketing services companies in Japan, to about a third after requests from other shareholders. bit.ly/2jwULvg The Guardian * The business secretary, Greg Clark, has been urged by the GMB union to block the proposed merger of German energy group Innogy's British unit, npower with SSE's British retail supply business .bit.ly/2jxZCMG * The chief executive designate of GKN, Kevin Cummings, has been ousted from the FTSE 100 company weeks before he was due to take up the top job at the aerospace and engineering firm. bit.ly/2jz3GvX The Telegraph * Jaguar Land Rover has quietly started testing driverless cars on British roads that are simultaneously being used by the general public, in a clear indication that Britain's biggest manufacturer is determined the country will play a leading role in the race to develop autonomous vehicles. bit.ly/2jyNx9Z * The Serious Fraud Office has made its first charges against Unaoil employees in relation to a corruption scandal that has engulfed the oil and gas industry. bit.ly/2jy7he2 Sky News * The boss of U.S. investment bank Goldman Sachs, Lloyd Blankfein, has used his latest Twitter post on Brexit to suggest a second referendum is held. bit.ly/2jyVwnr * The GMB union's Scotland secretary, Gary Smith, has told Sky News a dispute threatening 1,400 jobs is a battle for the future of skilled manufacturing in Scotland. bit.ly/2jy60U4 The Independent * Rail passengers on the UK's leading long-distance network face disruption and cancellations after Virgin Trains staff belonging to the RMT union voted to strike by a majority of 10 to one. ind.pn/2jvIwil * Retail sales continued to grow in October according to the latest official data, easing some of the fears of a plunge in consumer spending. A survey of retailers by the CBI had suggested the fastest rate of decline in sales in October since the UK's last recession in 2009. ind.pn/2jyWfFb
Insurer says funds from sell-off would go first to organic growth then M&A
Prudential (PRU) and units see rating action from Moody's Investors Service, which might help the Multi line insurer retain investors' faith and write more business in the future.
American Financial's (AFG) new issuance to redeem senior notes reflects its wise move to capitalize on a low interest rate environment in order to procure funds.
Arthur J. Gallagher (AJG) intends to enhance its brokerage operations with Associated Insurance buyout, which might strengthen its inorganic portfolio.
Although Hartford Financial (HIG) continues to grow on its strategic initiatives and solid financial health, softness in Personal Lines and Talcott Resolution segments remains a concern.
The Zacks Analyst Blog Highlights: Pfizer, Occidental Petroleum, Charles Schwab, Prudential and S&P Global
The Zacks Analyst Blog Highlights: Pfizer, Occidental Petroleum, Charles Schwab, Prudential and S&P Global
Prudential supervision of banks has increasingly relied on capital requirements. But bank capital played a relatively minor role in predicting bank solvency during the Global Crisis, except for scarcely capitalised banks. This column argues that while capital is a helpful tool to support bank financial stability, it is complex for supervisors to calibrate it precisely. Macroprudential authorities should be able to complement capital-based tools with additional, borrower-based prudential instruments.
Top Analyst Reports for Pfizer, Occidental Petroleum & Charles Schwab
Today, investors often place their faith in stocks that they think are poised to grow exponentially in both the near and long-term. This often leaves growth-minded investors fixated on stocks such as Amazon (AMZN) and Facebook (FB), which continue on their meteoric climbs.
MetLife's (MET) Q3 earnings reflect volume growth. The board of directors also approves a $2 billion buyback program. The company also is on track to return $4.5 billion to shareholders in 2017.
Higher revenues, lower expenses and strong assets under management drive Prudential Financial's (PRU) Q3 earnings performance.
Yesterday's brief late night dip in ES has been promptly bought with US equity futures fractionally lower, Asian shares inching higher on Thursday and Europe unchanged ahead of today's Super Thursday, where we get the Republican tax bill revealed shortly before noon, the BoE's rate hike announcement, and Trump appointing Jay Powell as the next Fed chair, as well as as earnings from companies including Apple and Starbucks. With the dollar dropping slightly, markets seem to have taken a shine to the euro and EM FX, specifically your high beta currencies. “There is some element of uncertainty about the U.S. tax bill and next Fed chief, and this is having an effect on the U.S. market, though shares in Asia appear quite resilient today,” said Ayako Sera, senior market economist at Sumitomo Mitsui Trust. “Still, it would not be surprising if some investors used the uncertainty as a reason to take profits after recent strong gains,” she said. Among the main events today, and as widely reported yesterday, the White House plans to nominate current Fed Governor Jerome Powell as the next chair when Janet Yellen’s term expires in February, a source familiar with the matter said on Wednesday. Powell’s nomination, which would need to be confirmed by the Senate, is expected later on Thursday before President Donald Trump leaves on a trip to Asia. Rising expectations that Trump will tap Powell, who is seen as more dovish on interest rates, have pressured U.S. Treasury yields and kept the dollar on the backfoot this week, according to Reuters. The progress toward American tax reform is also on most investors’ radars, alongside corporate earnings and Friday’s U.S. jobs report. There have been conflicting reports about when and how the U.S. tax rate on companies would be lowered. US GOP tax bill said to propose 12% repatriation tax on cash and 5% rate on non-cash holdings. US House Republicans were reported to be mulling a corporate tax phase out after 10 years, while US House Tax Committee Chairman Brady said that a permanent corporate tax reduction could require several steps. On Wednesday, the Fed held policy steady as expected and emphasized rising economic growth as well as a strengthening labor market, while downplaying the impact of recent hurricanes. Investors took that as a sign the U.S. central bank is on track for another hike next month, with federal fund futures putting the odds of a December rate hike at about 85% according to Bloomberg calculations. With regards to the BoE, the market prices in a 90% probability of a hike today. Our economists see the outlook for the meeting as tilted towards hawkish messaging on the outlook for rates next year, at least relative to market pricing. But they struggle to see this as credible without more certainty over Brexit and more evidence of faster wage growth. Both the dollar and sterling lag G-10 peers as investors awaited central bank news from both sides of the Atlantic, with BOE forecast to raise rates for the first time in a decade and Trump said to nominate Powell as the next Fed Chair. Bund futures set fresh day lows after soft French, Spanish auctions drive broad EGB weakness. Gilt and Treasury futures dip, though trade in tight ranges. European stocks mostly lower, with DAX leading losses while Italy’s FTSE MIB outperforms; health care leads sector declines, Sanofi weighing after trimming the outlook for its diabetes business. Rally in base metals pauses; most metals drop on LME, led by zinc and nickel. In global equity markets, European stocks were little changed near their highest level since 2015 amid a slew of earnings, as investors braced for the BOE’s first rate hike in more than a decade. The Stoxx 600 rose 0.1%, with real estate shares leading gains, led by Intu Properties which rose after saying it sees sustained retailer demand and rising rents. Credit Suisse climbed as its assets under management rise to a record. Playtech slumped, dragging on travel-and-leisure shares after forecasting full-year performance below the bottom end of estimates. The U.K.’s FTSE 100 holds steady ahead of the BOE rate decision on Thursday. Asian shares were mixed as a rally that drove prices to the highest level in 10 years showed signs of tiring. Materials stocks led gains in Asia amid a surge in nickel prices this week to a two-year high. The yen strengthened against the U.S. dollar after the Powell news hit the tap.e The MSCI Asia Pacific Index gained 0.1% percent to 169.86 as of 4:19 p.m. in Hong Kong, with the materials sector gauge touching a five-year high. Nickel has jumped 10 percent this week through Wednesday to the highest level since June 2015, while some investors are betting iron ore will command higher prices next year. Honda Motor Co. was the biggest boost to the index after raising its guidance and announcing a new shareholder returns policy. News about Trump’s decision to nominate Powell, first reported by the Wall Street Journal, followed the central bank’s policy statement that reinforced expectations of a rate hike in December and said growth in the world’s largest economy was “solid.” Investors expect the appointment of Powell, the Fed’s only Republican, to be an extension of the dovish policies under Janet Yellen that have contributed to the rise in global stock markets. "The biggest factor for today’s gain is the sudden rally of nickel prices on Tuesday and Wednesday, as its surge affects miners in Indonesia, Australia and New Zealand, in the midst of recent rallies of crude and iron ore," said Seo Sang-young, a strategist at Kiwoom Securities. China stocks retreated as small caps fell to a one-month low. The ChiNext Index of small-cap and tech shares was the biggest loser Thursday, dropping to a one-month low, while the Shanghai Composite Index also declined and stocks in Hong Kong gave up earlier gains. The SHCOMP lost 0.3% to 3383, facing strong resistance at 3400; mid & small-caps selloff continues, Nasdaq-style Chinext down 1.3%. Tesla-related stocks tumbled as Elon Musk said Tesla would not spend major capital in China until 2019. After initially rising following a strong ADP report, Treasury yields then fell on Wednesday and the yield curve flattened the most since 2007 after the Treasury Department said it would keep auction sizes steady in the coming months, despite the Fed’s plan to reduce its bond holdings. 10-year yields were at 2.359% in Asian trading, compared to their U.S. close of 2.376% on Wednesday, when they dipped as low as 2.349% . German 10Y yields rose one bps to 0.39 percent, the highest in a week. Britain’s 10% yield also climbed to 1.356 percent, +1bp, the highest in a week, while Japan’s 10Y declined 0.055 percent, -1bp, the lowest in four weeks. In commodities, crude oil futures steadied, with Brent crude up 7 cents at $60.56 per barrel and U.S. crude down 1 cent at $54.29. While oil settled lower on Wednesday after weekly U.S. government inventory data showed the latest crude stock draw was not as big as an industry trade group had reported, both Brent and U.S. crude futures remain near their highest levels since July 2015 as lower global supply pushed markets higher. Gold gained 0.1% to $1,276.34 an ounce, the highest in more than a week. Copper fell 0.7% to $3.12 a pound. Elsewhere, bitcoin extended gains for the fourth consecutive day, hitting $7,000 to establish a fresh record. Bulletin headline Summary from RanSquawk Markets subdued as anticipation on the BoE USD finds some support following overnight weakness, as Trump intends to select Powell as the next Fed Chair Looking ahead, highlights include The BoE Rate Decision and QIR, Fed’s Powell, Dudley and Bostic Market Snapshot S&P 500 futures down 0.2% to 2,570.25 STOXX Europe 600 up 0.02% to 396.85 MSCi Asia up 0.1% to 169.84 MSCI Asia ex Japan down 0.05% to 556.24 Nikkei up 0.5% to 22,539.12 Topix up 0.4% to 1,794.08 Hang Seng Index down 0.3% to 28,518.64 Shanghai Composite down 0.4% to 3,383.31 Sensex down 0.04% to 33,588.29 Australia S&P/ASX 200 down 0.1% to 5,931.71 Kospi down 0.4% to 2,546.36 Gold spot up 0.1% to $1,276.28 U.S. Dollar Index down 0.2% to 94.67 German 10Y yield rose 1.1 bps to 0.384% Euro up 0.2% to $1.1636 Brent futures down 0.4% to $60.28/bbl Italian 10Y yield fell 2.3 bps to 1.538% Spanish 10Y yield unchanged at 1.475% Top headline News from Bloomberg President Donald Trump plans to nominate Federal Reserve Governor Jerome Powell to the top job at the U.S. central bank, according to people familiar with the decision. The annoucement is due at 3 p.m. Washington time. “Not only is he the continuity candidate given he is already on the Fed board, but he also has a good working relationship with the current FOMC,” Michael Hewson, chief market analyst at CMC Markets, writes of Powell. House Republican leaders plan to unveil a tax bill Thursday that would cut the corporate tax rate to 20 percent -- though it may not stay there. The decision may come down to congressional scorekeepers who’ll assess the effect on the federal deficit Euro-zone manufacturing PMI increased to 58.5 in October -- the highest since February 2011 and the second-highest in over 17 years, as companies boost hiring to cope with a surge in orders that is set to last Japan’s Government Pension Investment Fund posted its fifth-straight quarterly gain, the longest run in more than two years, as global stocks advanced to new highs and weakness in the yen helped boost the value of overseas investments Bitcoin climbed past $7,000 for the first time, breaching another milestone less than one month after it tore through the $5,000 mark North Korea is working on an advanced version of the KN-20 intercontinental ballistic missile that could potentially reach U.S., CNN reports, citing unidentified U.S. official Tesla Inc. still hasn’t figured out how to overcome manufacturing challenges that threaten its viability as an automaker, with battery factory- line glitches pushing out production targets for the Model 3 sedan While Credit Suisse Group AG wasn’t immune to the third- quarter trading slump, Chief Executive Officer Tidjane Thiam’s pivot to wealth management drove assets to a record as the bank predicted continued strong performance After two rocky days in Congress, Facebook and Twitter face rising momentum for regulation of political ads to curb Russian election meddling, although some key Republicans remain skeptical and urged the companies to do a better job on their own German Unemployment Extends Decline as Economy Powers Ahead Sex-Harassment Storm Hits U.K. Political Elites Amid Brexit Asian equity markets were mostly subdued as region failed to sustain the early momentum from US, where stocks printed fresh intraday record levels before some profit taking crept in. Furthermore, a deterioration in sentiment coincided amid a continued pullback in US equity futures due to tax plan uncertainty, with reports now suggesting the plan could include a phase out in corporate taxes after a decade. As such, ASX 200 (-0.1%) finished negative with financials pressured after big 4 NAB announced to drop 6,000 workers. Elsewhere, Nikkei 225 (+0.3%) was indecisive but extended on 21-year highs nonetheless, while Hang Seng (-0.2%) and Shanghai Comp. (-0.7%) were lower after the PBoC skipped its liquidity operations. Finally, 10yr JGBs saw marginal gains as they tracked upside in T-notes and amid an indecisive risk tone in Japan, while the BoJ were also in the market for JPY 710bln of JGBs in the belly to super-long end. European Equity markets have traded mixed, with little way of direction, as participation focus moves to 12:00GMT and the BoE. Sectors also trade rangebound, with Telecoms out-performing, marginally so, up 0.30% with financials behind, as expectations are on a hike from the UK Central Bank. Healthcare and IT pull the bourses lower however, both down 0.50%. Fixed Income markets follow the subdued trading fashion, with yields relatively stagnant. Much attention was on auctions from Spain and France, particularly the former, as an increased scope has been on Spain following the recent political turmoil. In FX, the central bank week continued yesterday evening, as the FOMC’s retained rates between 1.00% - 1.25%. Markets were seemingly unfazed, with much of the Greenback’s hinging on President Trump’s announcement of the next Fed chair, with market expectation increasingly looking toward an appointment of Governor Powell. The Dollar Index saw some selling pressure as we entered the morning’s Asian session, finding some support around the 94.40 area as Europeans came to market, aided by the rate hike expectations for Dec increasing to 92%, from a previous 83%. EUR/USD looks towards key support at last week’s low at 1.15, as GBP/USD trades in a range-bound fashion, as full focus is on the BoE interest rate decision. Sterling traders will await the MPC’s decision, followed by Carney’s 12.30 press conference 30 minutes later, with expectations on a 25bps hike (>90%) from the Central Bank. Concerns remain toward data from the UK however, with a larger trade deficit, weaker retail sales and manufacturing activity, accompanied by a slowdown in CPI growth, all possibly still on the mind of the MPC members. EUR/GBP trades around a key support level, above the 0.8750, despite the break seen yesterday, offers do remain around these levels. In commodities, oil news has been light today, with the highlight coming from the SOMO stating Southern Iraqi Crude exports stood at 3.35mln bpd in October (3.24mln bpd in Sep). Markets are unfazed, with WTI consolidating within the day’s range.. Saudi Energy Minister Al-Falih said he expects oil market to continue proving and producers to renew resolve to normalize stockpiles. Kuwait said it sees oil output cut being announced in Vienna and that the length of extension and other alterations could be announced in Feb-Mar. (Newswires) OPEC wants to see the floor for oil prices at USD 60/bbl in 2018, according to a source familiar with Saudi oil thinking. US Event Calendar 7:30am: Challenger Job Cuts YoY, prior -27.0% 8:30am: Initial Jobless Claims, est. 235,000, prior 233,000; Continuing Claims, est. 1.89m, prior 1.89m 8:30am: Nonfarm Productivity, est. 2.6%, prior 1.5%; Unit Labor Costs, est. 0.4%, prior 0.2% 9:45am: Bloomberg Consumer Comfort, prior 51 DB's Jim Reid concludes the overnight wrap Today’s EMR is basically a therapy session and if I’m still writing the EMR in 30 years’ time (for anyone that will have me) you can trace the reason why back to today. For 43 years on this planet I’ve lived my life in a fairly prudent manner making sure that there is a rainy day fund for any unforeseen circumstances. However guess what I’m doing today on the day the Bank of England likely raises rates for the first time in a decade and from the lowest level in the bank’s 323 year history? Yes I’m taking out a large loan and buying a new house. Likely at the top of a very expensive UK property market and as Brexit lurks around the corner. Long time readers will remember that 3-4 years ago we did extensive renovations on our current house which was supposed to be a forever home. However at that point we didn’t have any children and had to come to terms with the fact that we may never be lucky enough to have them. Not in our wildest dreams did we imagine that 3 years later we’d have 3 of them. So although our house is wonderful, after finding out we had twins coming we very vaguely explored the possibility of finding a house with a layout more appropriate for our expanded family and the next thing we knew we’d fallen in love with a place and made an offer. It completes today. We won’t move in for a year as we don’t do anything simply and it needs a fair amount of work. So I’m in state of shock still. One day I will weigh up the full lifetime monetary cost of the ‘incident’ last Xmas holidays that led to the twins arrival (e.g. new car, full time childcare help, new house, future school fees, university costs and deposit for a first home etc etc). However for now I’m burying my head in the sand From the sand dunes welcome to super , super Thursday with a busy day ahead. First we have the European manufacturing PMIs delayed from yesterday due to holidays, then we’ll likely have the first BoE rate hike for a decade and then in the US session Mr Trump is going to be busy as he announced yesterday that today would see his Fed Chair pick revealed (WSJ say Powell chosen) and he’s also likely to stand with lawmakers to announce the House tax bill (9am EST/3pm BST the time expected). With regards to the BoE, the market prices in a 90% probability of a hike today. Our economists see the outlook for the meeting as tilted towards hawkish messaging on the outlook for rates next year, at least relative to market pricing. But they struggle to see this as credible without more certainty over Brexit and more evidence of faster wage growth. This follows last night’s FOMC where the statement was largely designed to not tone down markets’ strong expectation of a rate hike in December (probability now up 9ppt to 92%). In the details, Fed officials voted unanimously to keep rates on hold this month. On the recent economic performance, the Fed has upgraded the description from rising “moderately” to “rising at a solid rate despite hurricane-related disruptions”. On unemployment, it changed from “has stayed low” to it has “declined further”. On inflation, it acknowledged that although the storms had boosted headline inflation, core inflation remained soft, but there was no change to the committee’s view that “inflation…is expected to remain somewhat below 2% in the near term, but (will) stabilize around the 2% objective over the medium term.” On the recent hurricane disruptions, it reiterated that it will continue to affect economic activity, “but past experience suggests that the storms are unlikely to materially alter the course of the economy over the medium term”. Overall, DB’s Peter Hooper continues to expect three more hikes next year with the voting committee shifting in a modestly hawkish direction. Refer to link for more details. Now onto tax reform, as per Republican lawmakers involved in the discussions, the tax bill will impose a one-time tax of 12% (vs. 10% from prior reports) on US companies’ accumulated offshore earnings that are held as cash and 5% for non-cash holdings (per Bloomberg). Finally, Treasury Secretary Mnuchin is reportedly resisting a gradual phase-in of tax cuts over 5 years (ie: from 35% to 20% by 2022, -3ppt p.a) as it would not boost growth as much as expected. We can’t wait to find out more later today. As for the Fed Chair announcement this afternoon, the WSJ claimed last night that Powell has got the job. According to people familiar with the matter, the White House has notified Powell that President Trump intends to nominate him as the next Chairman and that Trump has also personally spoken with Powell on Tuesday too. Such an outcome had been increasingly priced in so it’s unlikely to impact markets too much. This morning in Asia, markets are trading a bit lower, but the Nikkei is up 0.19% to a fresh 21 year high following Honda’s corporate result (shares +5%). Although we’re at 21-year highs we first saw these levels 30 years ago so three decades of treading water for the index in reality. Across the region, the Hang Seng (-0.15%), Kospi (-0.39%), Shanghai Comp. (-0.58%) and ASX 200 (-0.08%) are all down as we type. Looking forward, most eyes this morning will be on the final revisions to the October manufacturing PMIs, which also includes a first look at the data for the periphery. The consensus is for no change to the flash reading for the Eurozone at 58.6. As a reminder, if that holds it will be the highest reading in 80 months. We’ll actually have to wait until next week to get the remaining services and composite prints. In terms of the country specific details today, Germany and France are expected to broadly stay put relative to their flash readings, while Spain is expected to nudge up half a point to 54.8. Italy is also expected to see a modest rise of 0.2pts to 56.5. For completeness, yesterday’s data in the Netherlands (60.4) was the second highest on record while Greece softened a bit to 52.1 – although more significantly held above 50 for the fifth month in a row following nine sub-50 prints. Elsewhere the UK firmed 0.3pts to 56.3 (vs. 55.9 expected), a solid level but still below levels of other G10 nations. Now recapping market’s performance from yesterday. US bourses edged higher back towards their record highs, with the S&P (+0.16%) and Dow (+0.25%) up slightly, while the Nasdaq dipped 0.17% following strongerperformance back on Tuesday. Within the S&P, gains were led by energy (+1.09%) and materials stocks, with partial offsets from telco and utilities names. After the bell, Facebook was down c2% despite posting higher than expected quarterlyrevenue, although the stock is already up c56% YTD (vs. S&P up c15% YTD). European markets were also broadly higher, as the DAX jumped 1.78% to a fresh record high as trading resumed post a holiday. Across the region, the Stoxx gained 0.39% to a 2 year high driven by materials and tech stocks, while the FTSE (-0.07%) and Spain’s IBEX (-0.16%) fell marginally. The VIX was broadly steady at 10.2. Over in government bonds, yields were mixed but little changed. The UST 10y pared back intraday gains to be 0.7bp lower, while core European bond yields rose c1bp (Bunds +0.9bp; Gilts +1.1bp; OATs +0.8bp). At the 2y part of the curve, Bunds were flat while Gilts rose 2.9bp ahead of the potential BOE rate hike today. Turning to currencies, the US dollar index gained 0.28% following the marginally hawkish FOMC meeting, while the Euro and Sterling weakened 0.23% and 0.29% respectively. In commodities, WTI oil dipped 0.15% following an API report that showed a slightly less than expected decline in US crude and gasoline stockpiles. Precious metal strengthened modestly (Gold +0.25%; Silver +2.53%) while other base metals fell marginally (Copper -0.04%; Zinc -0.59%; Aluminium -0.73%). Away from the markets, the UK trade secretary Fox said the EU is being “unreasonable” by requiring UK to pay a Brexit bill before allowing talks to move onto trade and transition deal. He noted “the idea that the UK would actually agree to a sum of money before we knew what the end state looked like… I think is a non-starter”. However, this partly contradicts Brexit Secretary Davis earlier comments where he noted “the withdrawal agreement…will probably favour the EU in terms of things like money and so on”. Elsewhere, the CEO of BOE’s prudential regulation authority Sam Woods noted that Oliver Wyman’s estimate of up to 75,000 job loss in banking and insurance is “plausible” if the UK leaves the EU bloc without a trade deal. With all this bubbling along, we shall find out more with the next round of Brexit talks to resume from 9th November. Over in Japan, Mr Abe has been officially reappointed as PM following his clear election win. On the choice of the next BOJ governor whose term ends next April, PM Abe said “the slate is completely blank”, although he also noted “I’ve faith in (existing) governor Kuroda’s abilities and I leave monetary policy up to him”. Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the macro data was a bit mixed. The October ADP employment change was above expectations at 235k (vs. 200k expected), although there was a 25k downward revision to the prior month’s reading. The October ISM manufacturing remains solid as it eased from last month’s 13 year high to 58.7 (vs. 59.5 expected). In the details, 16 of 18 industries reported expansion and the new orders index eased 1.2pts to a still very solid reading of 63.4. The final reading for the October Markit manufacturing PMI was broadly in line at 54.6 (vs. 54.5 expected). Elsewhere, construction spending came in at 0.3% mom (vs. -0.2% expected) and total car sales in October were above expectations at 18m (vs. 17.5m expected) as demand continues to be supported by post storm purchases. Finally, the Atlanta Fed’s early GDPNow model estimate of 4Q GDP growth is now 4.5% saar. If true, this would only mark the 4th quarter since the great recession has the US economy ever reached this high level. Finally in the UK, the October Nationwide house price index was in line at 0.2% mom, leaving an annual growth of 2.5% yoy and Sweden’s manufacturing PMI was 59.3 (vs. 63.5 expected) in October. Looking at the day ahead, we have the BoE meeting outcome due around lunchtime. BoE Governor Carney will follow while the Bank’s latest inflation report will also be released alongside this. Datawise we’ll receive the final October PMI revisions in Europe along with the October unemployment print in Germany and initial jobless claims and Q3 nonfarm productivity and until labour costs in the US. The Fed’s Bostic is also due to speak along with the IMF’s Lagarde. Today the new Fed Chair and draft tax plans are expected to be announced. Apple and Credit Suisse are amongst the notable corporate reporters.
It's official: according to most news sources, tomorrow Trump will announce that Fed governor Jerome "Jay" Powell is Janet Yellen's replacement as the next bank-friendly Fed chair. Since Powell has served as Federal Reserve governor for the past five years, starting May 2012, he has had ample opportunities to express his views about the policies he will oversee if the Senate confirms him as the central bank’s next chairman. For those who want a detailed breakdown of each of the 48 speeches he has given since May 12, 2012, here’s a link to a WSJ speech analyzer breaking down all of his spoken public appearances. For those pressed for time, below are samples of what he has said on important policy issues along the way. First, we look at the big picture items, courtesy of the WSJ's David Harrison: On Interest Rates Mr. Powell, 64 years old, has backed Ms. Yellen’s policy of gradually raising interest rates if the economy improves as projected. In recent public remarks he has sounded an optimistic note, saying he expects inflation to move up to the Fed’s 2% target, economic growth to remain steady and the unemployment rate to fall further. “I would view it as appropriate to continue to gradually raise rates,” he said in June. On Shrinking the Fed’s Portfolio Mr. Powell in September voted in favor of beginning the yearslong process of winding down the central bank’s $4.5 trillion portfolio. Like Ms. Yellen, Mr. Powell has said the Fed could resort to new rounds of asset purchases in another crisis if the economy needs more stimulus. Putting new assets on the Fed’s balance sheet should be an option “only in extraordinary circumstances,” he said in February. On Monetary Policy Rules Mr. Powell has joined several of his Fed colleagues in warning against relying too heavily on mathematical rules such as the so-called Taylor Rule to guide monetary policy. That could put him at odds with congressional Republicans who have pushed the Fed to adopt such a formula in an attempt to make Fed policy-making more transparent and predictable. “Simple policy rules are widely thought to be both interesting and useful, but to represent only a small part of the analysis needed to assess the appropriate path for policy,” he said February. “I am unable to think of any critical, complex human activity that could be safely reduced to a simple summary equation.” On Fannie Mae and Freddie Mac Mr. Powell has called on Congress to overhaul the housing finance system, saying he’d like to see the country’s two large mortgage-finance firms, Fannie Mae and Freddie Mac, move out from under government conservatorship. More private capital in those firms would reduce the risk of a taxpayer-funded bailout in the event of a downturn, he said in a speech in July. Although the Fed isn’t responsible for housing finance, it supervises some of the country’s largest lenders who frequently sell their loan to the two agencies. “No single housing finance institution should be too big to fail,” he said. Ffor a more nuanced take, also via the WSJ, here are explicit thematic summaries of his speeches on a variety of topics: June 2013: ‘Volatility is unavoidable’ Mr. Powell spoke after a Fed policy meeting where officials signaled they would start cutting back a bond-buying program designed to boost the economy, which led to volatility in financial markets that became known as the “taper tantrum.” “Some volatility is unavoidable, and indeed is a necessary part of the process by which markets and the economy adjust to incoming information … I want to emphasize the importance of data over date … The path of [bond] purchases is in no way predetermined; we will monitor economic data and adjust our purchases as appropriate.” March 2014: ‘As long as necessary’ Mr. Powell gave his views about the future of monetary policy at a Senate hearing: “Today, our economy continues to recover from the effects of the global financial crisis, unevenly and at a frustratingly slow pace. The task for monetary policy will be to provide continued support as long as necessary, and to return policy to a normal stance over time without sparking inflation or financial instability. This will require a careful balancing, as there are risks from removing monetary accommodation too soon as well as too late.” June 2014: On ‘forward guidance’ Mr. Powell defended the Fed’s practice of using verbal guidance about the likely path of policy to affect long-term interest rates. “My view is that forward guidance has generally been effective in providing support for the economy at a time when the federal-funds rate has been pinned at its effective lower bound…To be sure, there have also been times when forward guidance and market expectations have diverged, with resulting spikes in volatility. Such situations may be difficult to avoid, given the use of new, unconventional policy tools, although we always try to communicate policy as clearly as possible.” February 2015: Defending Fed emergency programs With Republicans in Congress considering legislation to increase scrutiny of the Fed’s decision-making, Mr. Powell defended the Fed’s response to the financial crisis. He opposed congressional audits of monetary-policy decisions, requirements that the Fed hew more closely to a specific equation in setting policy and limits on its ability to lend to financial firms in a crisis. “The evidence as of today is very strong that the Fed’s actions generally succeeded and are a major reason why the U.S. economy is now outperforming those of other advanced nations … Given the scale of the Fed’s actions during the crisis, it has been not only appropriate but essential that these actions be transparent to the public and subject to close and careful scrutiny by the Congress. And that is exactly what happened. So it is jarring to hear it asserted that the Fed carries out its duties in secret and is unaccountable to the public and its elected representatives. The Federal Reserve is highly transparent and accountable to the public and to the Congress.” February 2015: On activist regulation In early 2015, the Fed and other regulators were cracking down on lending standards at big banks in the leveraged-loan market, where the borrowers are companies with high levels of debt. Mr. Powell supported the policy, but warily. “I believe there should be a high bar for ‘leaning against the credit cycle’ in the absence of credible threats to the core or the re-emergence of run-prone funding structures. In my view, the Fed and other prudential and market regulators should resist interfering with the role of markets in allocating capital to issuers and risk to investors unless the case for doing so is strong and the available tools can achieve the objective in a targeted manner and with a high degree of confidence.” February 2016: ‘Let incoming data do the heavy lifting’ In December 2015, the Fed raised its benchmark interest rate for the first time in nearly a decade. Mr. Powell later explained the decision by the Federal Open Market Committee as driven by financial data. “In the statement released after its October 2015 meeting, the committee re-emphasized data dependence and focused on the importance of incoming data for the committee’s decision ‘at its next meeting,’ which led the market to increase its estimated probability of a December rate increase from 38% to 50%. The October and November nonfarm payroll reports came in strong and above expectations, raising that probability by the time of the December meeting to about 90%. In other words, the committee used modest time-based guidance to set the stage and then let incoming data do the heavy lifting.” May 2016: On the risks of gradual rate rises As officials talked about raising rates again, Mr. Powell advocated for moving gradually, while acknowledging the risks involved. “If incoming data continue to support [my] expectations, I would see it as appropriate to continue to gradually raise the federal-funds rate … There are potential concerns with such a gradual approach. It is possible that monetary policy could push resource utilization too high, and that inflation would move temporarily above target. In an era of anchored inflation expectations, undershooting the natural rate of unemployment should result in only a small and temporary increase in the inflation rate. But running the economy above its potential growth rate for an extended period could involve significant risks even if inflation does not move meaningfully above target. A long period of very low interest rates could lead to excessive risk-taking and, over time, to unsustainably high asset prices and credit growth.” June 2016: Why low rates? The following month, Mr. Powell explained why he believes the Fed is operating in a different climate than before the 2008 financial crisis. “I am often asked why rates remain so low now that we are near full employment. A big part of the answer is that, at least for the time being, the appropriate level of rates is simply lower than it was before the crisis. As a result, policy is not as stimulative as it might appear to be…I expect our economy to continue to make progress. Monetary policy will need to remain supportive of growth, as we work through the challenging global environment.” November 2016: On Fed communications Mr. Powell spoke last year about how members of the Fed’s policy committee should communicate with the public. “In my view, communications should do more to emphasize the uncertainty that surrounds all economic forecasts, should downplay short-term tactical questions such as the timing of the next rate increase, and should focus the public’s attention instead on the considerations that go into making policy across the range of plausible paths for the economy.” January 2017: On limits of Fed power He spoke in January about the limits of the Fed’s power to increase economic growth. “A period of low rates for a long time could present significant challenges for monetary policy. It could also put pressure on the business models of some financial institutions. Ultimately, the only way to get sustainably higher interest rates is to improve the broader environment for growth, by adopting policies designed to increase productivity and potential output over the long term—policies that are mainly outside the scope of our work at the Federal Reserve.” February 2017: ‘Gradually tighten’ Mr. Powell praised the Fed’s patience and said it would be appropriate for the Fed to gradually tighten monetary policy over time. “I expect the economy to continue broadly along its current path, which implies further labor market tightening and inflation edging closer to 2%. On this path, unemployment would decline modestly below current estimates of the natural rate and remain there for some time. I see that as a desirable outcome and do not see data suggesting that we are behind the curve. In recent years, the economy has faced significant downside risks, particularly from weak global conditions. The [rate-setting Federal Open Market Committee] has been quite patient, and I believe that has served us well. But risks now seems to me to be more in balance. Going forward, I see it as appropriate to gradually tighten policy as long as the economy continues to behave roughly as expected. As always, the actual path could be faster or slower than expected and will depend on developments in the economy.” February 2017: On flaws in rules-based policy Mr. Powell commented on whether the Fed should follow more explicit rules when setting monetary policy. “Simple policy rules are widely thought to be both interesting and useful, but to represent only a small part of the analysis needed to assess the appropriate path for policy. I am unable to think of any critical, complex human activity that could be safely reduced to a simple summary equation. In particular, no major central bank uses policy rules in a prescriptive way, and it is hard to predict the consequences of requiring the [Federal Open Market Committee] to do so, as some have proposed. policy should be systematic, but not automatic.” April 2017: Defending Wall Street regulation Mr. Powell defended regulatory policies adopted after the financial crisis but left room for changing some of them. “Some aspects of the new regulation are proving unnecessarily burdensome and should be better tailored to meet our objectives. Some provisions may not need—may not be needed at all, given the broad scope of what we’ve put in place. I will support and I do support adjustments designed to enhance the efficiency and effectiveness of regulation without sacrificing safety and soundness or undermining macro-prudential goals.” August 2017: The Mystery of Inflation “Inflation is a little bit below target, and it’s kind of a mystery,” he said in August in a CNBC appearance. “You would have expected, given that we’re getting tighter labor markets, that we’d have a little higher inflation. I think that what that gives us is the ability to be patient.” Source: WSJ
By EconMatters We discuss Herbalife stock (HLF) as basically being the poster child for the Stock Market, Bitcoin Market and a reflection of how Central Banks are all twiddling their thumbs while Rome is burning, they just are about as clueless and irresponsible custodians of financial markets` prudential regulation as one can get. Expect a major correction coming in financial markets, go to cash now, everything must be in cash! © EconMatters.com All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle