Today's stock and macro update: FOMC to be a non-event, China stabilisation is premature

Nick Batsford, CEO of Tip TV, was joined by Mike Ingram, Strategist for BGC Partners, on the Tip TV Finance Show discuss the FOMC meeting and US data, plus the ECB, China and the Bank of Japan.

Market wait FOMC statement

Batsford highlighted FX Street, who noted that Fed interest rates are likely to be kept unchanged, with a surprise, although very unlikely, would be one of a dovish tone. They continued that a non-event may keep the USD strength intact as dropping rate hike bets makes Treasuries an attractive investment option, which therefore makes US Dollar a risk-off currency. Today has a 4.6% chance of a rate hike, with that figure increasing to 30.5% for the December Fed meeting, and rising even higher to 57.3% in March 2016. Ingram commented on US economic data which has become weaker since the last meeting, and with other central banks threatening to lower rates and talking their currencies down and the China stabilisation being arguably premature, the FOMC is very likely to be a non-event. However, he added that the statement released from the meeting may be interesting.

Draghi pushing for QE if inflation continued to fall

Ingram outlined that Draghi indicated at more QE if inflation continues to fall, as well as successfully talking down the Euro in the last meeting. Batsford highlighted Elliott, who commented that yesterday during a speech in Mexico City, the ECB Board member Beoit Coeure noted that the chances of Eurozone inflation remaining below the 2% target had increased. ‘If we see a risk that inflation would go back to 2% much less quickly or in a much more sluggish way than previously expected, that would imply that de facto real interest rates at this level would be higher… an open discussion, but it’s a discussion that has started’. Ingram expressed that the ECB expect inflation to end next year at 1.3%, and by 2017 be around 1.6% assuming the low oil and commodity prices don’t continue. Elliott also noted that Italy sold two-year sovereign debt at a yield of minus 0.023%, joining a select that gets paid to borrow money.

BoJ rhetoric still hawkish

Ingram finished on the Bank of Japan, and he commented that the Yen is strengthening and we will see a set of economic forecasts released alongside the policy decision. He continued that the number of people that think the BoJ will pull the trigger at the meeting tomorrow is falling.