“Central banks have made a $6t commitment to prop up financial markets via asset purchases. That might not limit the collapse in EPS, but it might limit the collapse in share prices,” Citi says.
Who needs earnings when you have central banks…
Archives of “banks” tag
rssBase-case still for Fed to stay on hold in December and through 2020 – Citi
Citi on the Fed outlook
Citi discusses the Fed policy trajectory in light of yesterday’s FOMC minutes from the October meeting.
“Minutes from the October 30th FOMC released overnight are broadly consistent with Citi analysts expectations for disagreement regarding the need to cut, but agreement that on leaving policy rates on-hold. On USD supply to year end (the more interesting part of the Minutes), Fed officials continue to look for ways to make sure funding pressures in the overnight lending market don’t cause a problem again with a “standing repo” seen as the preferred option that would likely provide substantial assurance of control over the federal funds rate (and USD supply). However, Citi analysts do not expect a final decision until H1 2020. ,” Citi notes.
“The Citi analyst view remains for the Fed to stay on hold in December and through 2020 though muted inflation makes hikes in the next year very unlikely. Cuts are possible should domestic activity data indicate a slowdown,” Citi adds.
Federal Reserve FOMC decision due Wednesday – preview
Via Société Générale, in brief:
- Fed… likely to cut
- A more favourable economic outlook, however, suggest two things: First, that recent rate cuts were offered only as an insurance policy and second, that the Fed is likely to pause on any further rate moves.
- We see any such pause as short lived.
- By spring 2020, economic evidence should, in our view, compel further rate cuts.
- Balance sheet details are also a key item.
China’s gold reserves data shows the country bought more again in September – up for the 10th month in a row
Data from the People’s Bank of China for the month of September 2019
- China’s gold holdings 62.64 mln ounces compared with 62.45 at the end of August
This is the 10th month in succession gold holdings have increased in China.
Here are the rate cut steps expected from the PBOC, perhaps as soon as next month
A report from Reuters outlines the likely path for People’s Bank of China interest rate cuts, maybe as early as September.
- expected to first reduce their funding costs by lowering the rate on its medium-term lending facility (MLF)
- That will open the door for a cut in the PBOC’s new benchmark lending rate, the loan prime rate (LPR), the next time it is set on September 20
- he MLF forms the basis for the new LPR rate, but banks can add a premium to reflect funding costs and credit risks
- In what was seen as a symbolic move, the revamped one-year LPR was set at 4.25% last week, down 6 basis points (bps) from 4.31% previously and 10 bps lower than the existing benchmark one-year lending rate, which will still apply to older loans
Article was overnight, so an ICYMI, link here for more.
PBOC Gov Yi Gang:
US nonfarm payroll data – scenarios for the Federal Reserve’s FOMC interest rate decision
ABN AMRO look at the implications for the next Federal Open Market Committee interest rate decision (meeting is on 30-31 July). ABN AMRO set the stage for Friday’s data:
- Markets will be particularly sensitive to incoming data as we approach (the FOMC)
- The key question for markets remains whether the Fed will cut 25bp or 50bp, rather than whether they will cut at all
- a 25bp cut is fully priced by OIS forwards
- a 50bp cut is 2/3 priced
The bank expects +175K, which is above consensus (160K), citing
- the May number was a very weak +75k (the Jan-April average was +195k).
- … likelihood of some payback for the May weakness
OK, for Fed implications (bolding mine):
- June nonfarm payrolls will therefore attract even more attention than usual
- A somewhat weak print (120-150k) would not have a significant market impact, but if we were to see another sub-100k reading, markets would likely take it to mean a higher likelihood of a 50bp rate cut, at least as a kneejerk reaction
- For the Fed, we doubt such a figure would be enough by itself to lead to a 50bp cut, and so we suspect such a market reaction would not last (by the same turn, we doubt a strong print would derail cuts).
—-
Hmmm. I reckon if its a sub 100K ABN AMRO might be surprised at the intensity of the market reaction. It would heighten the 50bp expectation again and see a lower USD in a thinly trading (post July 4 US holiday) market.
Goldman Sachs says the yen is undervalued – downside risk to 103 target
Via a Goldman Sachs note, says yen remains cheap, unlike many other safe havens
- positive news out of the US-China meeting could weigh on yen in the near term
- but its role as a portfolio hedge bodes will continue
Downside risks to GS’ 12-month USD/JPY target (at 103)
- proprietary models set 95 as fair value
- bullish yen view supported by BOJ having limited monetary policy space to ease further
- net outflows from Japan have shifted to “cross-border direct investment from portfolio flows, and outbound foreign direct investment could pull back on global trade uncertainty”
More:
- trade disputes
- unsettled global markets
may lead to a choppy USD
ATMs To Generate Receipts In Hindi-Hindi Ke Achhe Din
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.
RBI hikes CRR by 75 bps; repo rates untouched
The Reserve Bank of India, in its Monetary Policy review today has hiked the Cash Reserve Ratio (CRR) by 75 basis points (bps) to 5.75 per cent, while holding the repo and reverse repo rates steady in line with market expectations.
The CRR hike will be done in two tranches. The first one will be for 50 bps with effect from February 13, 2010, and the balance 25 bps will be effective from February 27, 2010. Eventually, this will drain out Rs 36,000 crore from the system.
Repo rate is the rate at which the banks can borrow money from RBI in order to avoid scarcity of funds.
The move comes on the back of spiraling inflation. Food inflation touched 17.4 per cent for the week ended 16 January 2010, slightly higher than previous week’s 16.81 per cent. Fuel price index rose to 5.7 per cent while primary articles price index touched 14.66 per cent for the week ended 16 January 2010.
A median forecast released by the Reserve Bank of India (RBI) in the pre-policy ‘Macroeconomic and Monetary Developments: Third Quarter Review 2009-10’ yesterday raised the economic growth projection to 6.9 per cent from the 6 per cent projected three months ago.
NIFTY Future :In panic low of 4757 was made and now trading at 4801.My Support and expected target was of 4724-4676 in panic.
-Don’t panic @ lower levels.
-If not breaks 4757 & trades above 4812 with volumes will take to 4845-4856 & there after watch unexpected buying upto 4889-4900 level.
Updated at 11:25/29th Dec/Baroda
Has A New Euro Downtrend Started?
Standard Chartered think so, targeting an eventual move to 1.15. They feel the ECB is getting closer to monetisation and euro-zone economy is weakening. Dow Jones reporting the banks’ strategist Steve Barrow saying ‘In short, has the euro started a journey that will lead to significant declines in coming months? We think the answer is ‘yes,’ he says’ |