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In the Global Week Ahead, Wednesday’s FOMC statement hits at 2 pm Eastern Standard Time (EST), closing out a 2-day Washington DC confab.
This latest monetary policy meeting offers traders a full forecast update. Chair Yellen’s press conference goes live a half hour later.
What to Expect—
(1) Don’t’ expect a Fed policy rate change until December.
(2) Do expect an announcement of reduced reinvestment in U.S. Treasury bond and Mortgage-backed security (MBS) holdings -- with implementation soon.
(3) Recall the Fed’s early balance sheet stabilization plan laid out in July: It set reinvestment caps at $6 billion and $4 billion per month of U.S. Treasuries and MBS/agency product for the first three months. Then, an escalator clause raised these caps every three quarters in equal increments toward $30 billion and $20 billion caps a year.
Less reinvestment means less incremental growth in the Fed balance sheet. This call is NOT for an overall balance sheet reduction, but a stage before that.
(4) ‘Dot plot’ guidance: Expect downward revisions to long-term rate guidance from some FOMC members. A decline -- from a 3.0% long-term ‘neutral’ policy rate by 25 or 50 basis points -- may be in some member’s Tea Leaves.
(5) Lower consumer price inflation (CPI) forecasts are likely. Any FOMC discussion should reveal the extent of uncertainty among members over the drivers behind soft 2017 inflation.
(6) Hurricanes Harvey and Irma: There should be 2017 guidance on negative effects. Positive rebuilding effects into 2018 may be discussed.
These are 6 dovish points. Don’t expect any surprises from this menu. It’s going to be a conservative meeting of advisors, spooked by weak inflation readings.
The longer rates go sideways, the better it is for stocks.
Top Zacks #1 Rank (STRONG BUY) Stocks—
Keep your focus on non-U.S. stocks. That is where the better large-cap stock values can be found these days.
Here are 3 examples…
Continental AG (CTTAY - Free Report) : This is a multi-national German tire-producing company. The $49 billion market cap stock gets a long-term Zacks VGM score of B.
Hitachi (HTHIY - Free Report) : This is the Japanese company with diversified operations mostly in Asia. The market cap stock at $34 billion has a long-term Zacks VGM score of A.
Arkema SA (ARKAY - Free Report) : This $8.6 billion in market cap French chemical company is engaged in the manufacturing and marketing of vinyl products, industrial chemicals and performance products.
Key Global Macro—
Wednesday is the big day, with the FOMC announcement.
On Thursday, the Bank of Japan follows the lead of the FOMC, and issues new rate and quantitative easing (QE) guidance.
Also on Thursday, Argentina’s economy may struggle to produce Q2 GDP growth, after seeing strong Q1 growth. Q1-17 saw the strongest growth (+1.1%) since 1H-2015. Argentina’s 2017 y/y growth rate can get to +2.6%.
On Monday, the Eurozone’s flash HICP inflation rate comes out. It has been tracking +1.3% y/y. The target is +2.0%.
On Tuesday, the FOMC starts its 2-day meeting.
The German ZEW indexes come out. Current conditions are at 86.7. Economic sentiment is at 10.0.
U.S. building permits are forecast to be 1.22 million, from 1.23 million before. Starts are forecast to be 1.115 million from 1.16 million before.
Russia’s unemployment rate gets updated. It has been at 5.1%.
On Wednesday, the U.K.’s retail sales (ex-fuel and auto) looks to fall to +0.80 y/y from 1.5% y/y. A monthly print of -0.5% is expected.
The FOMC gives markets their latest interest rate decision. The Fed Funds Rate is supposed to stay at 1.25% until the December meeting. Any discussion of weak inflation causes will be listened to closely.
The Fed’s Chair Yellen holds a press conference.
The South African Reserve Bank (SARB) comes out with its interest rate decision. It has been at 6.75%.
On Thursday, the Bank of Japan (BoJ) issues a new stance on its overnight rate, now at -0.10%. Governor Kuroda holds a press conference.
There is an ECB Council meeting.
There is a Norges Bank interest rate decision and monetary policy report from Norway.
Brazil’s IBGE inflation rate is down to 2.61% y/y.
U.S. initial claims should stay low at 284K.
Argentina’s GDP growth rate should be 2.6% y/y.
On Friday, the Eurozone composite PMI is out. The prior was high at 55.7. Services were 54.7 and Manufacturing was 57.4.
The U.S. manufacturing PMI comes out. It was 52.8.
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Doves Seen Out the Window: Global Week Ahead
In the Global Week Ahead, Wednesday’s FOMC statement hits at 2 pm Eastern Standard Time (EST), closing out a 2-day Washington DC confab.
This latest monetary policy meeting offers traders a full forecast update. Chair Yellen’s press conference goes live a half hour later.
What to Expect—
(1) Don’t’ expect a Fed policy rate change until December.
(2) Do expect an announcement of reduced reinvestment in U.S. Treasury bond and Mortgage-backed security (MBS) holdings -- with implementation soon.
(3) Recall the Fed’s early balance sheet stabilization plan laid out in July: It set reinvestment caps at $6 billion and $4 billion per month of U.S. Treasuries and MBS/agency product for the first three months. Then, an escalator clause raised these caps every three quarters in equal increments toward $30 billion and $20 billion caps a year.
Less reinvestment means less incremental growth in the Fed balance sheet. This call is NOT for an overall balance sheet reduction, but a stage before that.
(4) ‘Dot plot’ guidance: Expect downward revisions to long-term rate guidance from some FOMC members. A decline -- from a 3.0% long-term ‘neutral’ policy rate by 25 or 50 basis points -- may be in some member’s Tea Leaves.
(5) Lower consumer price inflation (CPI) forecasts are likely. Any FOMC discussion should reveal the extent of uncertainty among members over the drivers behind soft 2017 inflation.
(6) Hurricanes Harvey and Irma: There should be 2017 guidance on negative effects. Positive rebuilding effects into 2018 may be discussed.
These are 6 dovish points. Don’t expect any surprises from this menu. It’s going to be a conservative meeting of advisors, spooked by weak inflation readings.
The longer rates go sideways, the better it is for stocks.
Top Zacks #1 Rank (STRONG BUY) Stocks—
Keep your focus on non-U.S. stocks. That is where the better large-cap stock values can be found these days.
Here are 3 examples…
Continental AG (CTTAY - Free Report) : This is a multi-national German tire-producing company. The $49 billion market cap stock gets a long-term Zacks VGM score of B.
Hitachi (HTHIY - Free Report) : This is the Japanese company with diversified operations mostly in Asia. The market cap stock at $34 billion has a long-term Zacks VGM score of A.
Arkema SA (ARKAY - Free Report) : This $8.6 billion in market cap French chemical company is engaged in the manufacturing and marketing of vinyl products, industrial chemicals and performance products.
Key Global Macro—
Wednesday is the big day, with the FOMC announcement.
On Thursday, the Bank of Japan follows the lead of the FOMC, and issues new rate and quantitative easing (QE) guidance.
Also on Thursday, Argentina’s economy may struggle to produce Q2 GDP growth, after seeing strong Q1 growth. Q1-17 saw the strongest growth (+1.1%) since 1H-2015. Argentina’s 2017 y/y growth rate can get to +2.6%.
On Monday, the Eurozone’s flash HICP inflation rate comes out. It has been tracking +1.3% y/y. The target is +2.0%.
On Tuesday, the FOMC starts its 2-day meeting.
The German ZEW indexes come out. Current conditions are at 86.7. Economic sentiment is at 10.0.
U.S. building permits are forecast to be 1.22 million, from 1.23 million before. Starts are forecast to be 1.115 million from 1.16 million before.
Russia’s unemployment rate gets updated. It has been at 5.1%.
On Wednesday, the U.K.’s retail sales (ex-fuel and auto) looks to fall to +0.80 y/y from 1.5% y/y. A monthly print of -0.5% is expected.
The FOMC gives markets their latest interest rate decision. The Fed Funds Rate is supposed to stay at 1.25% until the December meeting. Any discussion of weak inflation causes will be listened to closely.
The Fed’s Chair Yellen holds a press conference.
The South African Reserve Bank (SARB) comes out with its interest rate decision. It has been at 6.75%.
On Thursday, the Bank of Japan (BoJ) issues a new stance on its overnight rate, now at -0.10%. Governor Kuroda holds a press conference.
There is an ECB Council meeting.
There is a Norges Bank interest rate decision and monetary policy report from Norway.
Brazil’s IBGE inflation rate is down to 2.61% y/y.
U.S. initial claims should stay low at 284K.
Argentina’s GDP growth rate should be 2.6% y/y.
On Friday, the Eurozone composite PMI is out. The prior was high at 55.7. Services were 54.7 and Manufacturing was 57.4.
The U.S. manufacturing PMI comes out. It was 52.8.