Preparing For Rate Hike

Weekly Economic Review – Preparing For a Rate Hike in The US


World blocs stock indexes finished the week various mixed. US leading indicators fell by 0.4% on average, the average European index, rose by 0.4% on average, while the index of emerging bloc fell by 0.5%, “led by” Brazil and Russia due to falling oil and commodity prices. Government bond markets were traded this week with a view moderate negative, bond yield 10-year US government increased from 2.48% to 2.57%, a similar trend seen in the UK and Germany. US corporate bonds decline. Since the beginning of the year, the global stock index rose 5.6%.

Recent announcements from Fed officials are signaling that a rate hike in the US 15/3 is almost a fait accompli.

The economic indicators released this week different world blocs were generally positive and indicated continued growth, and employed extra data the US unemployment were excellent. ADP survey showed a monthly supplement of 300 thousand people. The expectation only 190 thousand. The unemployment rate fell by a tenth to 4.7%. there was there an increase in productivity and a moderate increase than expected wage, export and import figures in Germany were higher than expected) to 3% or so (growth than expected in Japan), 1.2% (and increasing the growth outlook in OECD countries to 2.4% versus expectations of 2.3%, there was an increase business confidence. data from the UK suggest on a slowdown.

The positive economic indicators and statements the Fed increased the probability of raising US interest rates to 93% – and herald on possibility of a gradual cessation of quantitative easing in the euro zone.

Price of oil has the week at 9%, the index of commodity prices fell 3.7% this week, per ounce of gold decreased by 2.2% this week. The dollar was down 0.4% against a basket of currencies and 0.7% against the euro.

political

Trump manages this week to promote political objectives, a new immigration decree “approved” by the courts, and the appointment of a “liberal” Top of the Food and Drug Administration (close to the industry and opposes strict regulations).

Conclusions

Global stock markets mostly embody the current pricing of “good news”, among others, against the background of economic viability and companies. However, the number of challenges currently facing in 2017, including: pricing is not cheap, uncertainty around policy trump, elections in the Netherlands, France and Germany, possible deterioration in the political situation in Italy and the return of the Greek debt crisis headlines.

This, combined with the effect of monetary tightening is expected in the US currency basket, the era of expansions in Japan and Europe, supported adopting a conservative approach

Consumer Discretionary (XLY)- In view of the increase in income disposable light of the planned reform of the individual income tax.

Energy (XLE) – In view of the removal of environmental regulation, and support activities Locally.

Finance (VFH, XLF, KBE) – In view of the credit growth, net interest income, operating expense structure and quality of credit portfolios that show consistent improvement. Easing regulation of the financial system, improving consumer sentiment, an expected reduction in corporate and income taxes, disposable income and the improvement in revenue funding as a result of the increase in interest rates, supports in investment in the financial sector to the near future.

Technology (QQQ, VGT, FDN) – In light of conflicting effects on the bottom line of corporate tax reduction, on the one hand, and increasing regulatory supervision of the sector, on the other.

MSCI Europe / S & P Europe 350 (hedged) – In view of the positive effect of the expansionary monetary policy of the ECB on the profits of multinational companies (HEDJ).

Germany (hedged) – In view of the increase in revenues of export-oriented light of the weakness of the euro against the dollar (DXGE).

UK (hedged) – In view of the interest rate cut and positive growth and postponement of exit from the block will benefit private spending of leisure (DXPS).

Nikkei2225 (hedged) – In view of the monetary and fiscal expansion parallel to support the weak currency profits of exporters (DXJ).


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Weekly Economic Review - Risk Assets Continue to Stand Out - Investegies says March 20, 2017

[…] US interest rate, as expected, reached 1% (the upper limit of the target), with a majority of 9 to 1, almost unanimously agreeing […]

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