Focus on China, G20 meeting, US GDP and Fed speakers
19:00, 25 February 2016
· By CMC Markets
Confidence continues to return to world markets overnight and this morning. Mainland China markets stabilized overnight while the Hang Seng rebounded to a 2.5% gain, while a 1.5% rally in copper confirmed Thursday’s China selloff as an aftershock not a new downturn. Positive sentiment has continued into this morning’s action with US index futures for the Dow, S&P and NADSAQ up 0.6%-0.8% and major European indices like the FTSE and DAX rising 1.2%-2.0%.
Today’s China rebound has mainly been attributed to comments from PBOC Governor Zhou who indicated the central bank still has scope for more monetary support, that he expects fiscal policy to become more proactive and that fundamentals don’t support CNY falling further. These comments along with a rise in property prices helped to dispel some of the economic fears related to China removing one of the headwinds that had dragged down world markets at the start of the year.
Crude oil is also gaining ground again today with WTI and Brent both rising 1.2% as traders anticipate more meetings in March to hammer out details of the proposed production freeze among major producers like Saudi Arabia, Russia, Iraq and Venezuela. Iran’s participation remains unlikely as it continues to restore production with sanctions coming off. US drill rig activity coming out this afternoon may also influence production expectations and how crude finishes the week.
Rising metal and energy prices may help to boost energy producers and miners again today, although banks could be mixed with RBS down 8.0% in the UK after it posted another annual loss and pushed out the resumption of dividends past the previous estimate of Q1 2017.
There’s still a lot of potential news coming out today that could move markets ahead of the weekend. The G20 finance ministers meeting continues with solutions for how to support the sputtering global economy front and centre, although there appears to be a lot of contention over how to deal with the problem. Negative interest rates and currency levels may also be a big topic as countries try to head off currency devaluation war. US Treasury Secretary Lew already warned the street not to expect a co-ordinated round of new stimulus to come out of the meeting, but we could get some supportive talk and maybe some small measures. As with oil, gains are likely to be incremental over time not all at once.
Speculation on whether or not the Fed will raise interest rates again at its March meeting may also continue to today. First up is the Q4 GDP update but the most important figures may be the monthly and quarterly Core PCE inflation reports. Many of the Fed members that have been talking more dovishly lately have done so from a concern over the impact of lower oil prices on inflation. Core PCE is a measure the Fed likes to use so it could have a significant impact on their thinking. Also today two of the permanent voters we don’t hear from as often are speaking, Governors Powell and Brainard. Dr. Brainard has been firmly in the dovish camp even though she did vote the party line on the December increase, so any comments she has about March could be particularly telling.
Magna International $1.19 vs street $1.10, 13.6% dividend increase
Husky Energy CFPS $0.65 vs street $0.67
Significant announcements released overnight include:
China new house prices 2.5% vs previous 1.6%
UK GfK consumer confidence 0 vs street 3
France GDP 1.4% vs street 1.3%
France consumer prices (0.2%) vs street 0.0%
Spain consumer prices (0.8%) vs street (0.5%)
Sweden retail sales 4.0% vs street 3.7%
Norway unemployment rate 3.3% as expected
Italy hourly wages 0.7% vs previous 1.3%
Japan consumer prices 0.0% as expected
Singapore industrial production 9.3% vs street (5.1%)
NZ trade balance $8M vs street ($271M)
Upcoming significant announcements include:
1:00 pm GMT Germany consumer prices street 0.1%
8:30 am EST US advance goods trade blnce street ($61.2B)
8:30 am EST US Q4 GDP update street 0.4% vs previous 0.7%
8:30 am EST US Q4 personal consumption street 2.2%
8:30 am EST US Q4 core PCE inflation street 1.2%
8:30 am EST US personal income street 0.4%
8:30 am EST US personal spending street 0.3%
8:30 am EST US Jan core PCE inflation street 1.5%
10:00 am EST US consumer sentiment street 91.0
10:15 am EST FOMC Powell, Williams speaking
1:00 pm EST US Baker Hughes Drill rig count previous 514
1:30 pm EST FOMC Brainard speaking