It has been a big day for news already with lots more on the way. The FOMC meeting turned out to be much ado about nothing as the central bank maintained its benchmark rate as expected and kept its options open for June. In its statement, the central bank indicated employment growth remains strong but economic growth has slowed while personal income growth is outpacing spending growth. It also indicated inflation remains soft but this can change as commodity prices recover. Most interestingly, the Fed dropped all references to concerns about overseas developments, paving the way for a more domestic focus. There was one hawkish dissenter, KC Fed President George, same as last time. Trading in USD and US indices was choppy after the report indicating the Fed was successful in setting a neutral tone.
The technology sectors dominated stock market action. The day started with Apple’s earnings, sales and guidance miss in the spotlight as a 6.2% decline in its shares pulled the NADSAQ down 0.5%. Concern has been growing for some time that the iPhone product line was reaching the peak of its lift cycle so the miss didn’t have an impact on the broader market with the Dow gaining 0.25%. Twitter also took a big hit falling 16.2% with sales and sales guidance running below expectations.
Late in the day, focus turned to Facebook who posted stronger than expected earnings and sales sparking an 8.5% pop for its shares in aftermarket trading and helping the NASDAQ to recover lost ground. First Solar, on the other hand has dropped 6.5% on the news that its CEO is planning to retire.
Crude oil has been really resilient today. WTI sold off after a rise in DOE oil inventories contradicted a decline in API inventories Tuesday night. WTI regained its footing into the afternoon and finished strong with a 1.25% gain as it took another run at the $45.00/bbl level trading up near its highs for 2016 to date.
The RBNZ maintained its overnight cash rate (OCR) at 2.25%. NZD has rallied on the news indicating some traders had been hoping for an immediate cut and have been forced to scramble to get back on side.
In the statement, Governor Wheeler did indicate further easing may be required but gave no indication on when or if another rate cut could occur. Similarly, he indicated the NZD exchange rate remains higher than appropriate and suggested a lower dollar would be desirable but didn't make any intervention threats. The overall tone was neutral, expressing concern about the impact of low dairy prices, but also expressing concern about rising house prices. NZD has gained a big figure on the news but remains below the 70 cent barrier.
Focus now turns to Japan with a ton of news on the way. The latest Bank of Japan decision is due and ahead of that a number of key economic indicators are scheduled for release. Overall, expectations for the data are poor which can be taken two ways. A weak economy and low inflation could add to the case for more monetary stimulus. On the other hand, if the economy is still struggling after the central bank introduced negative interest rates earlier in the year one has to wonder if more stimulus would have any effect either.
Considering that JPY has rallied dramatically since the negative interest rate announcement, the market reaction to whatever news comes today may not follow conventional wisdom either. What does appears likely is that we could see significant volatility around the data and monetary policy announcements, and that Japanese stocks may continue to trade in the opposite direction of JPY, particularly exporters.
Facebook $0.77 vs street $0.62 (wow!!), sales $5.38B vs street $5.26B, mobile 82% of revenue, plans to create a new class of shares.
First Solar sales $848M below street $959M, raises low end of full year EPS guidance to $4.10-$4.50, CEO stepping down to be replaced by CFO
Texas Instruments $0.65 vs street $0.62
Open Text $0.80 vs street $0.84, 15% dividend increase
Significant announcements released overnight include:
US FOMC interest rate 0.25%-0.50% no change expected
NZ RBNZ cash rate 2.25% no change expected
US advance goods trade bal ($56.9B) vs street ($62.8B)
US pending home sales 2.9% vs street 0.8%
US DOE crude oil inventories 1.99 mmbbls vs street 1.75 mmbbls
US DOE gasoline inventories 1.6 mmbbls vs street (1.0 mmbbls)
UK Q1 GDP 2.1% vs street 2.0% vs previous 2.1%
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
9:30 am AEDT Japan unemployment rate street 3.3%
9:30 am AEDT Japan consumer prices street 0.0%
9:30 am AEDT Japan core CPI street 0.8%
9:50 am AEDT Japan retail sales street (1.4%)
9:50 am AEDT Japan industrial production street (1.6%)
TBA Bank of Japan decision no change to QE target expected
TBA Bank of Japan policy rate (0.10%) no change expected
3:00 pm AEDT Japan housing starts street (0.6%)
3:00 pm AEDT Japan construction orders previous 12.4%
11:30 am AEDT Australia export prices street (1.5%)
7:00 pm BST UK Nationwide house prices street 5.0% vs previous 5.7%
8:00 am BST Spain consumer prices street (0.7%)
8:30 am BST Sweden retail sales street 3.5%
8:55 am BST Germany unemployment chnge street 0K
8:55 am BST Germany unemployment rate street 6.2%
9:00 am BST Norway unemployment rate street 4.8%
9:00 am BST Norway retail sales street 0.4%
10:00 am BST Greece retail sales street (2.0%)
1:00 pm BST Germany consumer prices street 0.1%
8:30 am EDT US Q1 GDP street 0.7 vs previous 1.4%
8:30 am EDT US Q1 personal consumption street 1.7% vs previous 2.4%
8:30 am EDT US core PCE inflation street 1.9% vs previous 1.3%
8:30 am EDT US jobless claims street 259K
10:30 am EDT US natural gas storage street 70 BCF
11:00 am EDT US Kansas City Fed previous (6)