Federal Reserve meeting this week – no changes

The US Federal Reserve will start their two-day meeting on Tuesdeay. The monetary policy decisions will be published on Wednesday.

The financial markets have been waiting for the first rate cuts by the Federal Reserve several months. At the same time expectations of how many rate cuts there could be this year have varied a lot.

In the beginning of the year, the rate cut expectations were six but by June the expectations have declined to 1-2 reflecting the market and financial data changes.

And what about the timing? Maybe in September and December. The markets do not expect the Fed to cut rates yet on Wednesday but rather leave them at current stage at 5,25% – 5,5%.

The Fed will on Wednesday publish its economic projections which will show the central bank’s own projectories.

The main targets for the US central bank are the price stability and inflation around 2 % and full employment.

The US consumer price index for May will be published on Wednesdsy as well.

The state and resilience of the US banking sector will be seen in late June as the Fed will publish its bank stress tests results.

According to Fed, there were 32 banks with 100 billion dollars or more total assets under this review this year. The tests also higlight the biggest banks’ resilience towards possible economic recession and severe financial market shocks. The results are published on 26th June.

Lagarde: ECB to continue meeting by meeting

The European Central Bank President Christine Lagarde said that the Central bank will continue by meeting by meeting approach. She was explaining how the central bank will continue after todays rate cut.

Lagarde said the decisions of the Governing Council was not unanimous as one of the governers was against the decisions.

According to her, the ECB will follow three basic factors: inflatioin outlook, underlying inflation and the strength of monetary policy.

The new rates are 3,75% depocit facility, 4,25% main refinancing operations and 4,50% marginal lending facility.

Wall Street closed down for the week – rate meetings ahead

Stocks closed down at Wall Street last week. Dow Jones closed down 0,98%  for the week to 38.688,32 points, S&P 500 index closed down 0,51% to 5277,51 points and Nasdaq down 1,09% to 16.735,02 points.

The world focus last week was the US ex-president Donald Trump’s trial in so called ” hush-money” case. Mr Trump was convicted in the cases. The impact on the ongoing presidential campaign will be seen. Trump is leading in all the six states according to the WSJ. The new president will be elected in November.

The coming central bank meetings with monetary policy decisions during this June time will be closely followed as markets globally have sqeezed their number of rate cuts during this year and for example Fed’s number of  rate cuts have fallen to 1-2 from six in the beginning of this year.

The European Central Bank (ECB) is having its meeting next week on Thursday and the US Federal Reserve’s meeting is on 11-12 -June.

The eurozone inflation increased in May to 2,6% and core inflation to 2,9%. The markets are still waiting the first rate cut to happen next week in the euroarea.

The EU elections are on the June 9th and the recent trend in Europe has been the rise in the right-wing parties.

The UK elections are in July and the biggest contest is between the current PM Rishi Sunak’s Conservatives and the Labour party. The Bank of England is having its monetary policy meeting on June 20th, before the elections. The Governor of the BOE Andrew Bailey has mentioned several times that the UK is to cut rates before the US.

The US credit markets are having intensive times as about one trillion dollars worth of credits are being refinanced, according to Oak Hill Advisors.  According to co-founder Glenn August the reopening of the syndicated markets have drived the markets further this year. He was speaking in the Bloomberg Wall Street Show.

He mentioned also that the US markets are still benefitting  from the Covid stimulus packages from the central bank. The economy is growing and the unemployment figure is at historic low levels.

In the pharma sector Novavax stock took some profits as the stock closed down 2,97% for the week in New York. The stock has been up after its deal with French Sanofi. Novavax closed at 15,04 dollars.

Moderna decreased nearly 15% during the week after recent week’s jumps. The company said on Friday it has got the FDA approval for its adult RSV vaccine. Moderna closed at 142,57 dollars.

Eli Lilly closed up 2,09% for the week to 820,34 dollars as the Danish Novo Nordisk closed down 0,16% to 927,30 DKK. Pfizer closed down 0,76% for the week to 28,66 dollars.

In Europe Dax index closed down 1,05% to 18.497,94 points in Frankfurt and CAC40 index closed down 1,26% for the week to 7992,87 points.

In London the FTSE 100 index gained 1,67% for the week and closed at 8275,38 points. The pharma companies AstraZeneca and GSK were down for the week. The Luxury group Burberry closed down 1,02% on Friday to 1043  points

In Asia Topix index  closed up 1,09% to 2772,49 while In Hong Kong the Hang Seng index lost 2,93% to 18.079,61 points.

UK annual inflation 2,3% in April

Tje UK annual inflation declined to 2,3% in April from 3,2% in March. The monthly inflation rose 0,3%.

The core consumer price index declined to 3,9% from 4,2% in March.

The declining inflation to nearer Bank of England’s monetary target 2,0% indicate that the central bank may be ready to start cutting rates. The bank rate is now 5,25%.

The Bank of England kept the rate unchanged

The Bank of England’s Monetary Policy Committee decided to keep the key rate unchanged at its meeting on 8th of May in London. The bank rate is 5,25%.

-Underlying inflationary pressures in both regions (UK and US) have continued to moderate somewhat since the start of the year, though by less than expected in the United States. Forward interest rates have risen in the United States and, as a result, elsewhere, the central bank said in the release. 

– Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term in line with the MPC’s remit. The Committee has judged since last autumn that monetary policy needs to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipates, the bank clarifies.

-The Committee will consider forthcoming data releases and how these inform the assessment that the risks from inflation persistence are receding. On that basis, the Committee will keep under review for how long Bank Rate should be maintained at its current level, it said.

Fed keeps the rates unchanged – economic outlook uncertain

The Fedreal Reserve, Fed decided to keep the rates unchanged at its meeting on Wednesday. According to the central bank, there has been lack of further progress toward the 2 % inflation target. Also the economic outlook is uncertain, the Fed says.

– Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective, the Fed stated in the release.

– The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks, the Fed said.

– The Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent, it said.

UK annual March inflation eased to 3,2%

UK March CPI was 3,2%

The UK annual March inflation was 3,2%, which was more than estimated. According to Reuters, the estimate for March was 3,1%.  On monthly basis the inflation rose by 0,6%. In February the annual inflation was 3,4%.

The core inflation, excluding energy and food, was 4,2% while the estimate was 4,1%.

The sticky  inflation increases the pressures to delay the first bank rate cut in the UK. The Central bank estimated earlier that it could start to rate cuts before the US as the inflation dynamics are diverging.

The first rate cuts in the US are expected to happen in June if there are no radical economic indicators that could change the rate landscape.

Stocks closed Q1 high at Wall Street – meme-stocks again

Stocks closed high levels at Wall Street on Thursday. The main three indices have been broken record levels during the first quarter of this year.

Dow Jones have increased 5,55% during the quarter, S&P 500 index has gone up 10,74% and Nasdaq up 10,34%.

The AI rally and lately the meme stocks related to Reddit and Trump’s Truth Media have been lifting the markets. Nvidia stock have increased over 87% this year and Palantir’s stock over 38%.

At the same time in the pharma sector Eli Lilly has increased over 31% during this first quarter due to the obesity drug boost.  In the luxury side the French LVMH has gone up over 15%. Both companies overperforming the indices.

On the other side, the EV maker Tesla has seen its stock decrease 29,21% during the first quarter because of the tight competition in the EV markets. Apple has decreased 7,63% during the quarter.

The economic optimism about the coming Federal Reserve rate cuts during this year  and economic growth have strenghtened the trend in the financial markets.

It is now widely expected that the Fed will cut rates three times during this year by 25 basis points each.

In the global financial markets, the Japanese stock markets have performed best during the quarter. The Topix index has increased 16,39%. in Tokyo.

In Hong Kong the Hang Seng index has decreased 1,47% during the quarter.

In Europe the Dax- index has increased 10,28% and CAC40 index in Paris also 10,28%.

In London the FTSE 100 has gained 2,99% during the first quarter.

The Bank of England kept the rate unchanged

The Bank of England kept the bank rate at the current 5,25% level in its monetary meeting in London today.

– In the United States and the euro area, inflationary pressures have continued to abate, though by slightly less than expected. Material risks remain, notably from developments in the Middle East including disruption to shipping, the central bank said.

– Having declined through the second half of last year, UK GDP and market sector output are expected to start growing again during the first half of this year. Business surveys remain consistent with an improving outlook for activity, it continued.

– Twelve-month CPI inflation fell to 3.4% in February from 4.0% in January and December, a little below the expectation in the February Monetary Policy Report. Services consumer price inflation has declined but remains elevated, at 6.1% in February, the BoE said.

Fed decided to keep the rates unchanged

The US Federal Reserve decided to keep the federal funds unchanged at its meeting on Wednesday and stated it will monitor the inflation carefully.

– Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated, the central bank stated.

– The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks, the bank noted.

– In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent, the central bank stated.