Daily Financial Market Outlook
Daily Financial Market Outlook
Overview & economic commentary
Reaction to the US Fed’s decision last night to cut rates by 75bp to 2.25% will continue to influence markets today. The Fed surprised by taking more time to discuss the threat to inflation in the accompanying statement, a decision that helped to stabilize the dollar. Meanwhile in the UK, the minutes of the 5/6th March Bank of England MPC interest rate setting meeting and the official January labour market report will help inform on the economic situation and the likelihood of lower base rates. The BoE minutes are likely to show an 8:1 vote in favour of holding rates at 5.25% - David Blanchflower is expected to have been the only dissenter, voting for an immediate 0.25% cut. There may be comments in the minutes that will help assess members’ concerns over slower GDP growth/ higher inflation and hence firm up opinion about the interest rate decision at the next MPC meeting on 10th April. As regards UK economic data, we expect unemployment to remain at 2.5% of the workforce and claimant count to fall for the 17th consecutive month by 8,000 in February compared with 10,800 in January. January’s headline average earnings growth on a 3-month rolling basis may rise slightly to 3.9%, from 3.8% in December, below neutral 4.5% growth. Also, unit labour costs may fall to growth of 1.2% in January from 1.4% in December, easing pressure on firms’ margins from higher energy and raw-materials costs. The March CBI industrial trends survey is also published; a stronger figure is expected from +3% last month. Other data published today includes a possible EU-15 trade deficit of €5.5bn for January, up from €4.2bn in December and stronger Canadian wholesale sales of 0.9% up from minus 2.9% in December over the same period.
Currency commentary
The broad based dollar recovery on the back of the Fed rate decision stalled overnight, with market participants pondering whether the rebound may have further to go and what this may imply for the wider issue of global risk appetite. Better earnings from US banks propelled equities sharply higher and follow through buying in Asia means that equities/high yield fx plays could be the order of the day this morning. This should help to cap downside for sterling. UK labour market figures are due at 9.30 and could help to allay concerns about the UK economy as companies it grapples with rising Libor rates. The MPC minutes are also due and could offer some clues about the timing and likelihood of the next cut in base rates this spring. Anything else than 8-1 could trigger a wild knee-jerk reaction. Q4 bank earnings are due today from Morgan Stanley, and this could make a difference to the ebb and flow in stocks and fx.
Major data and events today
UK unemployment (sa, claimant count) (09:30)
Jan -10.8k Rate 2.5%
Feb (f’cast) -8.0k Rate 2.5%
Median -5.0k Range -11.2k:-2.0k UK ILO Unemployment rate (09:30)
Dec 5.2%
Jan (f’cast) 5.3%
Median 5.2% Range 5.2%:5.3% UK average earnings (3m avg, headline, sa) (09:30)
Dec +3.8%
Jan (f’cast) +3.9%
Median +3.8% Range +3.3%:+4.1% UK unit wage costs (3m avg, annual, sa) (09:30)
Dec +1.4%
Jan (f’cast) +1.2%
Median +1.6% Range +1.2%:+2.0% UK CBI Industrial trends survey (11:00)
Feb +3
Mar (f’cast) +5
Median +1 Range -2:+5 EU-15 trade balance (nsa) (10:00)
Dec -€4.2bn
Jan (f’cast) -€5.5bn
Median -€5.0bn Range-€10.0bn:+€2.0bn Canada wholesale sales (12:30)
Dec -2.9%
Jan (f’cast) +0.9%
Median +0.5% Range -0.2%:+2.2%BoE MPC publishes minutes of 5/6 March meeting (09:30)
Chart 1: Claimant count falls for 16 consecutive months…
Chart 2:..but 3-month rolling average wage growth eases
Lloyds TSB Bank
http://www.lloydstsbfinancialmarkets.com
Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
Comments
No comments yet.
Leave a comment