Markets remain in waiting mode ahead of FOMC meeting

US stocks started the day off but recovered in the afternoon to finish pretty much where it started. Stocks were pulled down initially by weaker than expected retail sales and a downward revision to last month’s report, partially offset by a much better than expected Empire manufacturing survey. US data this week is being viewed through the prism of what it could mean for the Fed decision today’s data was a wash giving support to both the hawks and the doves.

Crude oil also started to day off soft but WTI held $35.00 and clawed back some of its losses through the day to finish down 1.8%. The trading correction blamed on Iran’s continued intention to ramp production back up to pre-sanctions levels appears to have run its course. WTI has picked up on a smaller than expected increase in API inventories and could be active through tomorrow morning’s DOE reports.

Currency markets saw a number of significant swings in both directions. JPY remained king of the hill following yesterday’s decision to not bring in additional stimulus pausing after introducing negative rates at the last meeting. SEK was also strong on indications the Riksbank may be done lowering interest rates and could start to raise rates in 2017.

Oil sensitive currencies fell along with commodity prices with NOK down 1.0%, CAD down 0.7% and RUB down 0.3% with its blow cushioned by a positive reaction to Russia’s decision to pull out of Syria. Canadian stocks had a mixed day with oil producers under pressure, gold miners picking up and Valeant Pharmaceuticals falling 48% after reporting earnings and guidance well below expectations.

GBP also fell on a new Brexit poll published in the Telegraph showing the Leave camp leading 49%-47%. After factoring in the Leave camp’s higher interest in coming out to the pools, among likely voters, Leave has opened up a 52%-45% lead over Stay. This news didn’t have any impact on the FTSE, but GBP took a hit relative to USD and EUR falling about 1%. Sterling could be active again Wednesday around the UK employment report.   

NZD also fell 1% against USD over the last 24 hours while AUD has declined 0.7% with USD strengthening relative to resource currencies ahead of Wednesday’s FOMC meeting.

The US central bank is not expected to raise rates this meeting but with inflation pressures growing and the US economy still strong, the Fed is likely to use the statement, forecasts and press conference to signal another hike is likely in the spring (April most likely). Hawkish news or signals may boost USD and could send stocks initially lower then higher as a signal of tighter monetary policy driven by a stronger economy. Neutral to dovish news or signals could undermine confidence in the US economy and stock market while also sending USD lower.


Corporate News

Oracle            $0.64 vs street $0.62

Chipotle Mexican    same store sales (26.1%), guides Q1 EPS ($1.00) way below street $0.02

Economic News

Significant announcements released overnight include:

US API crude oil inventories        1.5 mmbbls vs street 2.5 mmbbls

US retail sales                (0.1%) vs street (0.2%)
US retail ex auto            (0.1%) vs street (0.2%)
US retail previous month        revised down to (0.4%) from 0.2%

US producer prices            0.0% vs street 0.1%
US core PPI                1.2% as expected

US Empire manufacturing        0.6 vs street (10.5) and previous (16.64)
US NAHB housing market        58 vs street 59

Canada existing home sales        0.8% vs previous 0.5%


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)  

TBA             US Primaries results from Florida, Ohio, Illinois, Missouri and North Carolina

9:30 am GMT        UK jobless claims change    street (9K)
9:30 am GMT        UK 3M employment change    street 144K vs previous 205K
9:30 am GMT        UK unemployment rate        street 5.1%
9:30 am GMT        UK average weekly earnings    street 2.0%

12:30 pm GMT        UK Osborne budget speech to Parliament

10:00 am GMT        Eurozone construction output    previous (0.4%)

8:30 am EDT        Canada manufacturing sales    street 0.5% vs previous 1.2%

8:30 am EDT        US consumer prices        street 0.9% vs previous 1.4%
8:30 am EDT        US core CPI            street 2.2%
8:30 am EDT        US real avg weekly earnings    previous 1.2%

8:30 am EDT        US housing starts        street 1,150K
8:30 am EDT        US building permits        street 1,200K

9:15 am EDT        US industrial production        street (0.3%) vs previous 0.9%
9:15 am EDT        US manufacturing production    street 0.1% vs previous 0.5%

10:30 am EDT        US DOE crude oil inventories    street 3.2 mmbbls
10:30 am EDT        US DOE gasoline inventories    street (2.2 mmbbls)


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