22 August 2014 - 19:41 pm
Simply put, as Citi noted, unless Fed head Janet Yellen goes full-dovish, risk assets face tremendous downside potential. As ConvergEx’s Nick Colas notes, Yellen receives a “B” grade from financial professionals, fewer than half (49%) of those surveyed approve of the job the Federal Reserve is doing. A clear majority (59%) of respondents describe the Fed as being “behind the curve” with respect to interest rates. Despite better-than-expected data whereever one looks in the US (apart from wages and housing), any hint of seni-dovish, or contingent dovish… or heaven forbid hawkish comments and the massive consensus trade that the Yellen Put has an ever-increasing strike price will fall rapidly by the wayside… though Draghi could come in later and save the day. With S&P so close to 2000, we suspect any hint of word ‘slack’ and algos will run stops and USDJPY will break 104.
Pre-Yellen: S&P Futs 1986, 10Y 2.407%, JPY 103.77, Gold $1278, Oil $93.35
*YELLEN: LABOR MARKET HASN’T FULLY RECOVERED EVEN AMID JOB GAINS
*YELLEN SAYS THERE’S `NO SIMPLE RECIPE’ FOR APPROPRIATE POLICY
*YELLEN: FOMC SHIFTING TO QUESTIONS ON LEVEL OF JOB-MARKET SLACK
*YELLEN SAYS GAUGING LABOR-MKT SLACK NEEDS TO BE `MORE NUANCED’
22 August 2014 - 15:52 pm
The Kansas City Fed’s annual Economic Policy Symposium kicked off on Thursday.
For many, the main event will be the appearance of Federal Reserve Chair Janet Yellen, who will offer opening remarks at 10:00 a.m. ET.
Other heavy hitters at the event include European Central Bank President Mario Draghi and Bank of Japan Governor Haruhiko Kuroda.
Here’s the full schedule via the Kansas City Fed.
Thursday, August 21, 2014
Opening Reception and Dinner
|President and Chief Executive Officer,|
|Federal Reserve Bank of Kansas City|
Friday, August 22, 2014
|Chair:||Peter Blair Henry|
|Dean, Stern School of Business,|
|New York University|
|Board of Governors of the Federal Reserve System|
Churn and the Functioning of Labor Markets
|Authors:||Steven J. Davis|
|University of Chicago|
|University of Maryland|
|Massachusetts Institute of Technology|
|Discussant:||Lisa M. Lynch|
Panel on Demographics
|University of Michigan|
|Ronald D. Lee|
|University of California, Berkeley|
|European Central Bank|
Saturday, August 23, 2014
|Chair:||Christina D. Romer|
|University of California, Berkeley|
Scars From the Crisis
|Author:||Till Marco von Wachter|
|University of California, Los Angeles|
|EDHEC School of Business|
|University of Rochester|
Overview Panel: Labor Markets and Monetary Policy
|Deputy Governor for Monetary Policy,|
|Bank of England|
|Bank of Japan|
|Alexandre Antonio Tombini|
|Central Bank of Brazil|
In a phone call with Barack Obama, Vladimir Putin has said that imposing sanctions on Russia is counterproductive and affects international stability. The two presidents agreed that the current situation is not in the interests of their countries.
Both Obama and Putin has emphasized the importance of an “immediate and sustained ceasefire” in eastern Ukraine, but at the same time noted that “significant differences” remained between Moscow and Washington over Ukraine, a Kremlin statement said.
Besides Ukraine, the two leaders touched upon the recent rounds of sanctions imposed on Russia by the US.
“The Russian head of state described the line of increased Washington’s sanctions as counterproductive, causing serious damage to bilateral cooperation and international stability as a whole,” the Kremlin’s statement, posted on its official webpage, said. >> Read More
The EU sanctions come into effect tomorrow and they have officially announced the details.
The Russian banks cited in sanctions are Sberbank, VTB bank, Gazprombank, Vnesheconombank and Rosselkhozbank. They will be prohibited from selling bonds or shares in the EU but permitted to carry out other operations in the EU.
If you like your legal guff fill your boots with the official EU release here
ATMs in Hindi-speaking states will now generate receipts in Hindi, along with English, as the Home Ministry has asked the Reserve Bank of India to direct banks to procure only those ATMs that can print receipts in Hindi.
The ministry has also instructed two major foreign suppliers of ATMs to upgrade the software in the existing ATMs to ensure printouts in Hindi.
The Department of Financial Services has written to the Home Ministry, saying the matter is under consideration. “We will be perusing this matter… the issue is that the printout of the receipt (from the ATM) should come in the language in which the transaction is being made,” a Home Ministry spokesperson said.
At present, only ATMs procured by the Union Bank of India from Diebold firm have the facility to print in Hindi.
>> Read More
Bad debts of public sector banks have surged to a nine-year high, with the corporate sector accounting for the biggest increase. This will be one of the key challenges before the new government.
Indeed, the current favourite to form the new government, the Bharatiya Janata Party, had in its manifesto expressed concerns over the bad debt situation. It promised “necessary steps to reduce non-performing assets (NPAs) in the banking sector” if it comes to power.
According to provisional data complied for 19 public sector banks by the Finance Ministry for the last meeting between Finance Minister P Chidambaram and public sector bank chiefs scheduled for Tuesday, the gross NPAs as a ratio of gross advances have reached 4.44 per cent against 3.84 per cent in 2012-13. Though less than 5.07 per cent as on December 2013, the gross NPAs are still at their highest level since 2004-05 when they touched 5.5 per cent.
Reasons for rise >> Read More
In a few short minutes, Fed Chairmanwoman Janet Yellen will hold the first part of her two-day testimony in Congress before the Joint Economic Committee (followed by testimony before the Senate Budget Committee), in which she will regale members of congress with tales about harsh weather in the first quarter, and who snow managed to subtract over $50 billion from the US economy in Q1. Yellen’s prepared remarks will likely focus on the FOMC’s broader views on the economic outlook, but the Q&A will be equally as important. It is possible she may be asked by Senate Committee members for more clarity on the Fed’s exit strategy and/or its view on the terminal funds rate. It is unlikely that she will say anything too market moving, especially since Goldman has schooled her how to avoid any “firm” calendar commitments of the “6 month” variety.
As Deutsche Bank notes, “She will be encouraged by the recent mix of stronger data, subdued inflation and a very well behaved bond market. However, with the market rate expectations even more dovish than the median FOMC dots, if anything there is still more risk that she is less dovish than the market has priced in, and if anything fractionally more USD friendly, but this will be subtle and not her intention, and therefore unlikely to support the USD on a sustained basis…. other topics that will get some air time include how much weight she puts on the backward looking data versus the relative strength of the Q2 data, her view on key labour market indicators, the time gap between the end of QE and the start of rate hikes and whether the Fed Chair sees any signs of financial market excess.”
- *YELLEN SAYS `HIGH DEGREE’ OF ACCOMMODATION REMAINS WARRANTED
- *YELLEN SAYS REASONS FOR FIRST QUARTER SLOWDOWN WERE TRANSITORY
- *YELLEN SAYS LABOR MARKET CONDITIONS `FAR FROM SATISFACTORY’
- *YELLEN SEES `SUBSTANTIAL AMOUNT OF SLACK’ IN LABOR MARKET
- *YELLEN SAYS INFLATION PERSISTING BELOW 2% `COULD POSE RISKS’
- *YELLEN FORECASTS FASTER GROWTH THIS YEAR THAN IN 2013
- *YELLEN SAYS FINANCIAL CONDITIONS `SUPPORTIVE OF GROWTH’
- *YELLEN SAYS U.S. HOUSING MARKET DATA `DISAPPOINTING’
- *YELLEN SAYS `FLATTENING OUT’ IN HOUSING MAY POSE RISK
- *YELLEN SAYS LOW RATES MAY PROMPT INVESTORS TO `REACH FOR YIELD’
- *YELLEN: EQUITIES, BROAD TYPES OF ASSETS PRICED WITHIN PAST NORM
- *YELLEN SAYS LEVERAGE `SUBDUED’ WITHIN FINANCIAL SECTOR
Watch her testimony live below:
With all eyes fixed on any mention of the length of time post-taper before rate hikes, stocks and bonds slid gently in the last few minutes before the minutes release – and sure enough…
- *SEVERAL FED OFFICIALS SAID FORECASTS OVERSTATED RATE RISE PACE
In other words, we are way more dovish than you thought we were… Weather was blamed for any slowdown and the pace of tapering appears set. Bear in mind these minutes reflect a discussion that took place – at least from a chronological standpoint – before Janet Yellen’s “six months” statement.
Pre-FOMC: S&P Futs 1852.75, 10Y 2.717%, Gold $1304
Here is the key fragment:
A few participants suggested that new language along these lines could instead be introduced when the first increase in the federal funds rate had drawn closer or after the Committee had further discussed the reasons for anticipating a relatively low federal funds rate during the period of policy firming. A number of participants noted the overall upward shift since December in participants’ projections of the federal funds rate included in the March SEP, with some expressing concern that this component of the SEP could be misconstrued as indicating a move by the Committee to a less accommodative reaction function. However, several participants noted that the increase in the median projection overstated the shift in the projections. In addition, a number of participants observed that an upward shift was arguably warranted by the improvement in participants’ outlooks for the labor market since December and therefore need not be viewed as signifying a less accommodative reaction function. Most participants favored providing an explicit indication in the statement that the new forward guidance, taken as a whole, did not imply a change in the Committee’s policy intentions, on the grounds that such an indication could help forestall misinterpretation of the new forward guidance.
So is “several” less than or more than 6 months? Of course, these are Fed forecasts. Which are always wrong anyway. Either way, stocks love it as the Fed has just given the go ahead to reflate the bubble some more.
FOMC Minutes April 2014
1. If the private sector has added more than 129,000 payroll jobs in March, the U.S. will be back to its peak level of private-sector employment.
2. The average workweek slipped by 0.1 hour to 34.2 hours in February, the lowest level since January 2011, but if there is even just a partial reversal of the weather distortion it should be enough to generate a rebound in the average
3. Watch the number of full-time jobs created, this is a key concern of Janet Yellen and the FOMC.
4. Average hourly earnings for all employees rose 0.4% in February, matching the strongest gain in more than two and a half years; if the gains continue in March it will reinforce the impression of a generally tightening labor market
5. The labor force participation rate, another key concern of Yellen and the Fed. Greater labor-force participation will be very welcome.