US: Fed’s November minutes likely to increase perception of December hike - BNPP

Research Team at BNP Paribas, suggests that Wednesday should prove to be a packed day for the US, with the release of the November meeting minutes of the US Federal Reserve, data on durable-goods orders and Michigan consumer sentiment.

Key Quotes

“The Fed held rates unchanged in November, but took some baby steps towards the next hike by saying that the case for higher rates “continued to strengthen,” and that it now only needs to see “some” further evidence of continued progress toward its objectives. Barring significant shocks, we expect the Federal Open Market Committee (FOMC) to raise rates by 25bp at its 12-13 December meeting. We expect the minutes to increase the perception that a majority of FOMC members want to hike in December; we believe the probability of a hike to be around 80%.”

“We expect durable-goods orders to have increased a solid 2.5% m/m in October. However, we expect most of the strength to have come from a jump in aircraft orders; we expect orders excluding transportation to be flat. We are expecting core capital shipments – which include non-defense capital goods excluding aircraft and feed into business equipment investment in GDP – to contract 0.6% m/m in October. This is not unusual, as companies tend to book revenues via shipments in the latter half of a particular quarter. Overall, we expect the data to continue to reflect weakness in fixed-investment spending.”

“The final Michigan consumer sentiment print for November is likely to tick down to 90.0 from its preliminary reading of 91.6. After a series of subdued readings, consumer sentiment rose by 5.1 index points in its preliminary November reading from its second-half October print. A key takeaway from the preliminary November survey was that a “large majority” of respondents based their outlook for the economy on expectations that Hillary Clinton would win the US presidential election. The election outcome could affect the final November sentiment reading.”