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Daily Economy Watch
Financial and economic news

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Daily Economy Watch keeps an eye on events that affect your hard asset portfolio. View archives.

March 22: Choppy day on Wall Street

Source: Reuters

New York -- Wall Street ended mixed after a choppy session on Wednesday as investors focused on President Donald Trump's struggle to push through a healthcare bill and snapped up stocks after a steep drop the day before. U.S. stocks in the previous session had suffered their worst day since before Trump's election as investors worried that the president's difficulty in overhauling healthcare was a sign he would also face trouble pushing through promised corporate tax cuts that have been behind the market's record-breaking rally since November. Stocks fell early in the day but later moved higher. Apple rose 1.7 percent and provided the biggest boost to the three major indexes.

"Investors with a lot of cash used yesterday's downturn and the morning's weakness today as a buying opportunity," said Alan Lancz, president of investment advisory firm Alan B. Lancz & Associates in Toledo, Ohio. Trump and Republican lawmakers appeared to be losing the support they need for controversial healthcare legislation scheduled for a vote in the House of Representatives on Thursday. Losing or delaying the vote would bruise investors' confidence in Trump's legislative ability and his ability to keep his big promises to business. "If that happens, you could see a little bit of volatility in the market," said David Schiegoleit, managing director at U.S. Bank Private Client Reserve in Los Angeles. See full story.

March 21: Delays to Trump tax cuts hit stocks

Source: Reuters

New York -- Wall Street fell sharply on Tuesday as investors worried that President Donald Trump will struggle to deliver promised tax cuts that propelled the market to record highs in recent months, with nervousness increasing ahead of a key healthcare vote. The S&P 500 and Dow Jones Industrial Average lost around 1 percent and were on track for their worst one-day percentage declines since before Trump's election victory in November.

With valuations stretched, investors see the Trump administration's struggles to push through the healthcare overhaul as a sign he may also face setbacks delivering promised corporate tax cuts. Expectations of those tax cuts are a major reason for the 10-percent surge in the S&P 500 since Trump's election in November. "The market is starting to get a little fed up with the lack of progress in healthcare because everything else is being put on the back burner," said RJ Grant, head of trading at Keefe, Bruyette & Woods in New York. See full story.

March 20: Protectionism worry drags on stocks

Source: Reuters

New York -- The U.S. dollar slumped to a six-week low on Monday on worries over a dovish Federal Reserve, while U.S. and European stock markets dipped amid concerns about G20 financial leaders' decision to drop a pledge to keep global trade free and open. The dollar index, which measures the greenback against a basket of six major currencies, was last slightly higher at 100.42 after touching its lowest since Feb. 7 of 100.020. The index extended last week's weakness following recent interest-rate guidance from the U.S. Fed that was less hawkish than many had expected.

Caution prevailed over U.S. and European stock markets after financial leaders of the world's biggest economies made only a token reference to trade on Saturday, acquiescing to an increasingly protectionist United States after a two-day G20 meeting failed to yield a compromise. Investors were awaiting Fed speakers this week, including Chair Janet Yellen on Thursday. See full story.

March 17: World stocks at record highs

Source: Reuters

New York -- A global stock market index hovered near record highs on Friday, wrapping up a week when many of the world's biggest economies either raised interest rates or signaled they might do so, underlining confidence about economic growth and inflation. The U.S. dollar slipped, continuing its slide in the wake of the Federal Reserve's decision on Wednesday to boost interest rates but maintain a gradual pace of hikes this year. Investors were also watching a meeting of world finance chiefs in Germany beginning on Friday, where economic reform, protectionism and exchange rates are expected to be discussed. MSCI's all-country world stock index edged up 0.1 percent on the day and touched an all-time high.

The Fed raised rates for the second time in three months on Wednesday and China hiked rates on Thursday, while Britain and a European Central Bank policymaker hinted at higher rates."It looks like the rest of the central banks may be thinking about tightening up a little bit," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama. "It confirms that growth is improving both domestically and globally, which is what everyone has been looking for ... They wouldn’t be doing that if their economies still needed aggressive monetary stimulus." See full story.

March 16: Dollar extends weakness after Fed

Source: Marketwatch

New York -- The U.S. dollar fell for a second straight day against its major rivals on Thursday, as investors continued to digest recent commentary from the Federal Reserve that indicated a less hawkish stance than had previously been suspected. The ICE Dollar Index DXY, which measures the greenback against a basket of six other currencies, fell 0.1% to 100.40. The day’s move extended a firm decline on Wednesday that followed the Fed’s first rate increase of 2017, as well as forecasts for two more rate increases by the end of the year.

Higher rates typically boost the dollar, and had over recent weeks, but the as-expected move triggered “sell the fact” among dollar holders initially. Plus, analysts said the disappointment stemmed from how many traders had expected more hawkish stance from Fed Chairwoman Janet Yellen, which could have resulted in a total of four hikes in 2017, rather than three. “Investors paid more attention to the commentary than the hike itself, and that indicated that inflation is still low and that Yellen hasn’t dropped her dovish leanings, suggesting the Fed won’t hike more aggressively than it indicated,” said Jane Foley, senior currency strategist at Rabobank. With the day’s move, the dollar index is on track for its fifth daily decline of the past six sessions. See full story.

March 15: Fed raises interest rates by a quarter-point

Source: Marketwatch

Washington -- The Federal Reserve on Wednesday increased its benchmark short-term interest rate for the second time in three months and signaled two more rate hikes this year. The Fed policy committee voted 9-to-1 to raise interest rates to a range of 0.75% to 1%. The Fed’s “dot plot,” a table of policymakers’ projections for short-term interest rates, shows three hikes in 2017, three in 2018 and three in 2019. This is unchanged from the prior forecast in December.

The dot plot shows more unity among the central bankers about their interest-rate forecast. Nine of 17 Fed officials penciled in two more rate hikes this year. That’s up from six officials in the last dot plot. And six officials see three hikes in 2018, up from three. Some economists had thought the Fed might signal it was ready to pick up the pace of rate hikes to once-per-quarter given signs that inflationary pressures seem to be building. Fed officials responded to these signs by only ticking up their forecast for core inflation to a 1.9% annual rate this year from 1.8% in the prior forecast. Fed officials see headline and core inflation reaching their 2% goal next year but not overshooting. Marketwatch

March 14: Pound hits lowest level since January

Source: Marketwatch

New York -- The U.S. dollar strengthened against its major rivals on Tuesday, seeing particular strength against the British pound, which fell to its lowest level since January against the buck a day after U.K. lawmakers set the stage for Brexit talks to begin. However, market direction could shift in the coming day following the Federal Open Market Committee’s two-day meeting, which is scheduled to get under way later Tuesday and is widely expected to result in an interest rate hike. Against the dollar, the pound dropped to $1.2158 from $1.2219 late Monday in New York, a move of about 0.5%. While the pound was off its low of the session—$1.2109—the U.S. currency was trading near levels it hasn’t seen since Jan. 17, when it fell to an intraday low of $1.204, according to FactSet Research.

The U.K. parliament passed the Brexit bill on Monday, giving Prime Minister Theresa May clearing the way for the formal process of the country’s exit from the European Union. She is expected to make a move to begin the two years of negotiations before the end of March. Investors are also keeping an eye on Dutch election, to be held Wednesday, which they believe could gauge the risk of a eurozone breakup. The shared currency was supported by the European Central Bank’s indication last week that it might not take fresh easing steps, despite caution over the election in the Netherlands. “The Dutch election will be one indicator of how the trend in Brexit and (U.S. President Donald) Trump’s victory translates to continental Europe,” said Shusuke Yamada, FX strategist with Bank of America Merrill Lynch in Tokyo. See full story.

March 13: British pound jumps on Brexit moves

Source: Marketwatch

New York -- The U.S. dollar traded at break-even levels Monday as investors moved cautiously in a week marked by a number of political tests for Europe and ahead of key decisions by global central banks. Drawing early attention were moves in the British pound, which strengthened against the greenback as traders appeared to unwind bets that the U.K. government would formally trigger an exit from the European Union imminently. The so-called Brexit bill returns to the House of Commons Monday for a debate and vote on whether to accept two amendments put forward by the House of Lords, the second chamber of lawmakers. The legislation gives the U.K. government the power to trigger Article 50, starting the formal process of ending its EU membership.

“The pound has been weakening for some time with a lot of people buying the cable [dollar-pound pair] in anticipation of the eventual Brexit and now that it is coming to fruition, people are probably cashing in on their bets. It’s a classic, “buy the rumor, sell the news” event,” said Neil Mellor, chief currency strategist at BNY Mellon. Investors will be keeping a close eye on the Netherlands ahead of its general election on Wednesday. An increase in tensions between the Netherlands and Turkey is seen as giving a boost to the populist leader of the far-right Party for Freedom, Geert Wilders, who has pledged to take the country out of the European Union if elected. “The Dutch election could serve as a precursor to what may happen in France, where anti-EU populist candidate Marine Le Pen is also looking strong. In the event of populist victories in Europe, the future of the European Union could come under greater threat,” said Fawad Razaqzada, market analyst at, in a note last week. See full story.

March 10: U.S. adds 235,000 jobs in February

Source: Marketwatch

Washington -- The U.S. economy churned out 235,000 new jobs in February in the first full month of the Trump White House, signaling steady growth ahead and all but assuring the Federal Reserve will raise interest rates soon. The economy has added almost half a million jobs in the first two months of 2017, the best back-to-back performance since last summer. Employment in weather-sensitive industries got a big boost from the second warmest February on record, including the biggest gain in construction jobs in 10 years.

Wages are also rising at the fastest pace of a recovery that’s nearing its eighth year of age, reflecting a tight labor market in which companies have to compete more aggressively for workers amid a record number of job openings. The unemployment rate, meanwhile, dipped to 4.7% from 4.8%, the government said Friday. More people entered the labor force in search of work and fewer gave up looking for jobs. “The unemployment continues to come down and layoffs are exceedingly low,” noted Jim Baird, chief investment officer at Plante Moran Financial Advisors. “The labor market is tight and getting tighter.” See full story.

March 9: Oil breaks below $50 a barrel

Source: Marketwatch

New York -- Oil prices dropped below $50 a barrel on Thursday for the first time this year, extending the 5% plunge a day earlier as the market worried that growing U.S. crude producers may undermine efforts to rebalance global supply and demand. April West Texas Intermediate crude slid $1.12, or 2.2%, to $49.16 a barrel on the New York Mercantile Exchange, after trading as low as $48.79 earlier in the session. Prices, which briefly attempted a rebound overnight, haven’t settled at levels this low since late November. May Brent crude on London’s ICE Futures exchange lost $1.14, or 2.2%, to $51.97 a barrel, also trading at levels not seen in more than three months.

Many analysts attributed Wednesday’s 5.4% plunge to a 8.2 million-barrel increase in U.S. crude stocks to a record level. It also marked the ninth consecutive weekly climb reported by the Energy Information Administration, which also revealed a rise in weekly domestic production to their highest level in more than a year. In a separate report earlier this week, the EIA also raised its production forecasts for this year and next. “It has obviously never been the intention of [Organization of the Petroleum Exporting Countries] to support the American oil industry, as this would reduce the impact of the lower OPEC production rate, and it’s now less likely the OPEC members will continue to honor the deal,” said analysts at Secular Investor, in a research note issued Thursday. See full story.

March 8: Private sector adds 298,000 jobs

Source: Reuters

Washington -- U.S. private employers added 298,000 jobs in February, well above economists' expectations, a report by a payrolls processor showed on Wednesday. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 190,000 jobs, with estimates ranging from 150,000 to 247,000. Private payroll gains in the month earlier were revised up to 261,000 from an originally reported 246,000 increase.

The ADP figures come ahead of the U.S. Labor Department's more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment. Economists polled by Reuters are looking for U.S. private payroll employment to have grown by 193,000 jobs in February, down from 237,000 the month before. Total non-farm employment is expected to have changed by 190,000. See full story.

March 7: U.S. trade deficit nears five-year high

Source: Reuters

Washington -- The U.S. trade deficit jumped to a near five-year high in January as rising oil prices helped to push up the import bill, pointing to slower economic growth in the first quarter and posing a challenge for the Trump administration. President Donald Trump took office with a pledge to boost annual economic growth to 4 percent and renegotiate trade deals in favor of the United States. Trump blames U.S. trade policy for the loss of American factory jobs and the import-driven surge in the trade gap could intensify the debate on a cross-border tax. "Team Trump really has their work cut out for them if they are going to stick with the campaign pledge to double growth," said Chris Rupkey, chief economist at MUFG in New York. "If it is not made in America then we don't want it is what the Trump administration is saying."

The Commerce Department said on Tuesday the trade gap increased 9.6 percent to $48.5 billion, also buoyed by imports of cell phones and automobiles. That was the highest level since March 2012. When adjusted for inflation, the trade deficit rose to $65.3 billion from $62.0 billion in December. Both the inflation-adjusted imports and exports were the highest on record in January, signs of improving domestic demand and stronger economic growth among U.S. trading partners. Nevertheless, the wider trade deficit suggests trade could again weigh on economic growth in the first quarter. Data such as housing starts, consumer spending and construction outlays have implied the economy struggled to regain momentum early in the first quarter after growth slowed to a 1.9 percent annualized rate in the final three months of 2016. Trade cut 1.7 percentage points from gross domestic product in the fourth quarter. Following the trade data, the Atlanta Federal Reserve slashed its first-quarter GDP estimate by five-tenths of a percentage point to a 1.3 percent rate. See full story.

March 6: Factory orders rise for second month

Source: Marketwatch

Washington -- New orders for U.S.-made goods increased for a second straight month in January, suggesting the recovery of the manufacturing sector was gaining momentum as rising prices for commodities spur demand for machinery. Factory goods orders rose 1.2 percent, the Commerce Department said on Monday after an unrevised 1.3 percent jump in December. Economists polled by Reuters had forecast factory orders advancing 1.0 percent in January. Factory orders were up 5.5 percent from a year ago. Total shipments of manufactured goods increased 0.2 percent after surging 2.5 percent in December.

Manufacturing, which accounts for about 12 percent of the U.S. economy, is regaining its footing after being buffeted by lower oil prices, a strong dollar and an inventory overhang. The nascent recovery was underscored by a survey last week showing a gauge of national factory activity jumped to a 2-1/2-year high in February. Manufacturing could be boosted by the Trump administration's proposed tax reform, which would include corporate tax cuts. Promises of a lower corporate tax bill have buoyed business confidence in the last few months, but are yet to translate into strong business investment on capital goods. See full story.

March 3: Dollar weakens againat yen, euro

Source: Marketwatch

New York -- The dollar weakened against the euro and yen on Friday, but still managed to finish higher on the week against its Japanese rival, after Federal Reserve Chairwoman Janet Yellen signaled that the central bank would likely raise interest rates at its coming meeting. Yellen said raising interest rates in March would “likely be appropriate,” confirming what has been a rapidly growing cadre of support from Fed officials around a rate hike in mid-March. “At our meeting later this month, the Federal Open Market Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the Federal-funds rate would likely be appropriate,” Yellen said in a speech to The Executives’ Club of Chicago.

The dollar immediately climbed higher after the release of Yellen’s prepared remarks, before quickly moving lower. Some attributed the sudden pull back to investors interpreting Yellen’s comments as leaving the Fed some wiggle room to sidestep a hike should next Friday’s labor-market report disappoint. “Her remarks were consistent with the chorus of fed speak this week,” said Joe Manimbo, a senior market analyst at Western Union Business Solutions. “But the Fed never wants to be painted into a corner. Her balanced message allowed for some wiggle room,” he said. Market-based odds of an interest-rate hike in March broke above 80% on Friday, up from 30% a week ago, according to data from the CME Group data, as a bevy of Fed officials talked up the likelihood of a rate hike. The Fed’s next two-day policy meeting begins on March 14. See full story.

March 2: Dollar at 2-month high on rate view

Source: Marketwatch

New York -- The dollar strengthened against major rivals on Thursday sending the ICE U.S. dollar index to two-month high, as yet another Federal Reserve official appeared to back a buck-boosting interest-rate hike sooner rather than later. The ICE U.S. Dollar Index DXY, which compares the dollar to six major currencies, gained 0.4% to 102.16, the highest level in two months. Fed Gov. Lael Brainard, largely considered a dove on monetary policy, said in a speech late Wednesday that the U.S. was getting close to full employment, inflation was moving toward targeted levels, and overseas growth had improved.

“Assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path” of rate rises, Brainard said at Harvard University’s John F. Kennedy School of Government in Cambridge, Mass. Brainard’s remarks followed hawkish comments from New York Fed chief William Dudley and the San Francisco Fed’s John Williams earlier this week, sharply boosting market-based odds for a March interest-rate hike. Higher rates tend to boost the buck because it translates into higher returns for dollar-based deposits. “Given that Brainard is a governor, which implies a permanent vote within the committee, her comments were taken seriously by the market, which is now pricing in a much higher probability for a March hike than yesterday,” said Charalambos Pissouros, senior analyst with IronFX Global. See full story.

March 1: Dollar spikes on rate expectations

Source: Marketwatch

New York -- The U.S. dollar surged against its major rivals on Wednesday after comments from a key Federal Reserve official added to the growing consensus that markets could expect an interest rate increase at the central bank’s March meeting. The WSJ Dollar Index BUXX, a measure of the U.S. dollar against a basket of major currencies, was up 0.4% at 91.55. The ICE U.S. Dollar Index DXY, which narrows that comparison to six currencies, spiked 0.7% to 101.82, hitting its highest level since Jan. 10. The day’s move added to the buck’s recent strength. It is currently up 2.1% over the past month, although it has struggled throughout 2017, and it remains 0.4% lower for the year.Higher rates tend to boost the buck because it translates into higher returns for dollar-based deposits.

Late Tuesday, New York Fed President William Dudley said that the case for a rate hike had become “a lot more compelling” since November’s presidential election. “It seems to me that most of the data we’ve seen over the last couple months is very much consistent with the economy continuing to grow at an above-trend pace, job gains remain pretty sturdy, inflation has actually drifted up a little bit as energy prices have increased,” Dudley said in a CNN International interview. In the latest economic data, a read on manufacturing rose more than expected in January and hit its highest level in two years, while construction spending fell 1% in January. Dudley’s comments were merely the latest in a series of ones hinting at a March move. Also on Tuesday, San Francisco Fed President John Williams said that, “in my view, a rate increase is very much on the table for serious consideration” at the March 14-15 meeting. See full story.

February 28: Stocks, dollar down before Trump speech

Source: Reuters

New York -- Stocks in major markets dipped along with the U.S. dollar and U.S. Treasury yields on the last day of February as investors waited for signals on stimulus spending and tax cuts in President Donald Trump's Tuesday night Congressional address. Investors worried whether Trump would be able to reveal any concrete plans to realize his campaign promises and some mentioned the possibility of a U.S. equities correction. "There's significant risk for a potential delay or a watering down of the campaign promises. He can get some things done but it won't be as phenomenal as expected," said Paul Eitelman, Multi-Asset Investment Strategist at Russell Investments in Seattle.

Wall Street indexes and bond yields were not helped by fourth-quarter U.S. data including gross domestic product growth that was below expectations while some investors had hoped for an upward revision, according to investment managers. "The real question becomes how much patience does the market have," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. See full story.

February 27: Business investment weak in January

Source: Marketwatch

Washington -- Business investment got off to a poor start in 2017 aside from the aerospace industry, perhaps a sign businesses are awaiting new policies by the Trump administration before acting. Orders for durable goods climbed 1.8% in January, but the gain was due entirely to a spike in contracts for commercial jets and military planes, the Commerce Department reported Monday. The increase in January was fueled by a 70% jump in orders for passenger planes and a 60% advance in bookings for fighter jets and related military goods. Orders for new cars and trucks also edged up 0.2%

Yet if airplanes and autos are stripped out, bookings fell 0.2% in January to mark the first decline in new orders minus transportation in six months. Orders fell for computers, networking gear, electrical equipment and primary metals used to make a variety of heavy-duty goods for businesses and consumers. As a result, a key measure of business investment known as core capital-goods orders dropped 0.4% in January. It was the first decline in four months. See full story.

February 24: Dollar softens against yen

Source: Marketwatch

New York -- The dollar eased against the Japanese yen and a handful of other rivals on Friday, but remained on track to finish the week little-changed. Brian Daingerfield, a macro strategist at Natwest markets, blamed a paucity of market-moving economic data, the perception that the odds of an interest-rate increase are declining, and a lack of new details surrounding President Donald Trump’s fiscal-policy plans for the dollar’s drift lower over the past week. “The market might’ve been looking for a more clear signal of a March move” when the Federal Reserve released minutes from its most recent two-day policy meeting earlier in the week, Daingerfield said.

Trump spoke at the Conservative Political Action Committee’s conference on Friday, but provided few details about his fiscal policy plans beyond the broad-strokes measures like tax cuts and infrastructure spending that have already been widely discussed. Earlier in the week, Treasury Secretary Steven Mnuchin said the administration would implement its tax-policy plans by Congress’s August recess, signaling that the impact in 2017 on U.S. economic growth from these policies would be minimal. “That’s pouring cold water on hopes rampant since last year’s election that an expansionary fiscal policy pivot will boost inflation and force the Fed into a steeper rate hike cycle,” said Ilya Spivak, strategist with FX Daily. See full story.

February 23: Dollar drops on Fed uncertainty

Source: Marketwatch

Washington -- The dollar weakened Thursday against most of its rivals after the Federal Reserve said it was confident that the next interest-rate increase would come “fairly soon,” but expressed concern about the uncertain fiscal-policy outlook. The ICE U.S. Dollar index DXY, a measure of the dollar against a basket of six rivals, dropped around 0.3%. In minutes from the central bank’s most recent policy meeting, released Wednesday, the central bank sounded decidedly more dovish than recent commentary from Fed Chairwoman Janet Yellen and a bevy of other Fed officials would suggest, market strategists said.

Doug Borthwick, managing director at Chapdelaine FX, a subsidiary of Tullett Prebon, said that, after almost a decade of near-zero interest rates, investors are looking for more concrete signs that borrowing costs will soon rise. The market these days listens less to Fed words and is more interested in Fed action,” Borthwick said. Typically, the dollar appreciates when investors expect interest rates to rise more quickly because higher rates increase returns on dollar-denominated assets.

February 22: Dollar weakens after Fed minutes

Source: Marketwatch

New York -- The U.S. dollar weakened against its major rivals on Wednesday, turning negative against both the yen and the euro after the Federal Reserve said there was considerable uncertainty surrounding fiscal policy, something investors have been looking to boost the dollar and stoke inflation. The U.S. dollar index DXY, -0.15% fell slightly on the day, after having risen by about 0.2%.

The comments, which were released as part of minutes from the Fed's most recent meeting, said that uncertainty over the Trump administration's fiscal policies were a major stumbling block. The minutes also revealed that "many" Fed officials had expressed support in raising interest rates "fairly soon," adding to the growing consensus that a rate hike could be announced at the March meeting, something that had been considered unlikely a few weeks ago. See full story.

February 21: Dollar rises after Fed comments

Source: Marketwatch

New York -- The U.S. dollar strengthened against major rival currencies Tuesday, as comments from a Federal Reserve official helped to drive up U.S. Treasury yields and with them, demand for the U.S. currency. The ICE U.S. Dollar Index DXY, which gauges the buck against a basket of six rivals, rose 0.5% to 101.4400.

“The latest catalyst pushing the dollar higher was a rising yield on the benchmark U.S. Treasury note following comments by Philadelphia Federal Reserve Bank President Patrick Harker,” said Akira Moroga, manager of forex product group at Aozora Bank. Harker signaled in an interview with Market News International that he would likely support an interest-rate increase at the central bank’s next meeting in March if he sees additional evidence that inflation is gaining momentum. Higher rates can boost the U.S. currency by making dollar assets more attractive to yield-seeking investors. See full story.

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