There have been a number of developments politically and economically overnight, with a lot more to come over the rest of this week and through the weekend.
It's a big day for central bank meetings which have taken a dovish tone so far. The Bank of Japan raised its GDP forecast by 0.1% to 1.6% but cut its inflation forecast by 0.1% to 1.4%. Governor Kuroda indicated to would be premature to talk about easing back until inflation is running above 2.0% so they remain pedal to the metal. The Yen is broadly weaker on this news, falling relative to USD, EUR, GBP and CAD.
Meanwhile, Sweden's Riksbank maintained its (0.50%) negative interest rate as expected but surprised the street by and increased its QE program by SEK 15B (US$1.7B) over the opposition of three board members. SEK is down sharply on this news.
The ECB announced no changes to monetary policy as expected this morning. At his press conference, President Draghi indicated he plans to maintain current QE levels (post one and done taper) through December at least. Although downside risks have diminished, inflation remains subdued and he plans to keep QE going until inflation gets back up above 2.0% on a sustained bases with interest rates to remain at current or lower levels until after the end of QE.
The Euro is bouncing around on the news with a rally unwinding declines seen earlier this morning. Part of the big Euro rally this week was on speculation that a Macron win in France would ease political uncertainty in the Eurozone enabling the ECB to move up its time table for tapering. The street appears so far to be viewing the comments as balanced even though they were not as hawkish as some had been hoping.
Politics also remains in focus, impacting a number of markets. In the US, risks of political turmoil appear to be easing. Last night Congress passed a one-week stopgap spending measure to avoid a government shutdown this weekend and allow negotiations to continue. The Republicans appear to be close to an agreement on health care reform with a vote possible this weekend or next week. Yesterday's tax reform package seems to offer something for everyone, but it remains to be seen what will actually get through Congress and how long it will take.
In foreign affairs, it appears the US is going to try sanctions on North Korea before military options, and President Trump eased back the rhetoric on NAFTA indicating it plans to negotiate (having spooked the markets with yesterday's tear up NAFTA and walk away posturing rumours). CAD and particularly MXN have bounced back strongly todayon this clarification.
Politics in Europe may also impact trading today. German legislators are expected to vote on a tough Brexit negotiating stance ahead of this weekend's EU summit on Brexit strategy. The second round campaign in France continues. The latest UK election poll from YouGov shows the Conservatives attracting (only) 45% support, still more than enough for a big majority.
Amid all of this news, stocks are mixed. European markets are down slightly this morning with the Dax down 0.2%, and the FTSE down 0.4%. US index futures are up 0.2%.
There are a ton of earnings reports out overnight and this morning. Suncor Energy has kicked off Big Oil results with a bang, coming in way above street estimates. Potash Corp results have also been a lot stronger than expected.
Suncor Energy $0.49 vs street $0.32
Potash Corp $0.18 vs street $0.11, sales $1.11B vs street $0.99B; raises 2017 ESP guidance to $0.45-$0.65 from $0.35-$0.55
Goldcorp $0.20 vs street $0.08
Union Pacific $1.32 vs street $1.23
Ford $0.39 vs guidance $0.30-$0.35
UPS $1.32 vs street $1.29
Citrix Systems $0.97 vs street $0.95
Significant announcements released overnight include:
Bank of Japan decision no changes to interest rates or QQE as expected
ECB decision no changes to interest rates or QE as expected
Sweden Riksbank decision (0.50%) interest rate unchanged as expected, surprise SEK 15B increase to QE
US jobless claims street 245K
US durable goods orders 0.7% vs street 1.3%, previous rev up to 2.3% from 1.8%
US durables ex transport (0.2%) vs street 0.4%
US cap orders nondef ex air 0.4% vs street 0.1%
US advance goods trade bal ($64.8B) vs street ($65.2B)
Germany consumer prices 2.0% vs street 1.9% vs previous 1.6%
Upcoming significant economic announcements include:
10:00 am EDT US pending home sales
10:30 am EDT US natural gas street 54 BCF
11:00 am EDT US Kansas City Fed street 20
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