Financial Market Review for December 11 2017

Financial Market Review for December 11 2017 Asian stocks strengthened Monday after a quiet start, building on Friday’s bounce that led to a global rally, while investors also kept an eye on the start of trading in bitcoin futures.

Prices for the volatile cryptocurrency BTCUSD, +14.19% jumped back above $15,000 as futures trading began on a Cboe Global Markets exchange and within four hours had eclipsed $16,000,. Just 24 hours earlier, bitcoin had been at $13,000. It was recently trading at around $16,700.

Market participants have been intrigued by bitcoin’s rise and might look at reinvesting profits there following recent profit-taking in Asian stocks in the wake of big gains across the market this year, In China, the Shenzhen Composite Index SHCOMP, +0.98% climbed 1.3 and startup-heavy ChiNext Price Index gained 1.2%.

The Chinese central bank injected a net 20 billion yuan ($3.02 billion) into money markets Monday after draining liquidity for two weeks, providing a lift to equities traders’ moods in China.

Japanese stocks perked up after the lunch break despite the yen’s weakness, with the Nikkei Stock Average NIK, +0.56% rallying into the close to finish up 0.6%.

After its best week of the year, the dollar broadly posted slight gains in Asia on Monday and was at ¥113.55 from ¥113.39 USDJPY, -0.07% at the end of Japanese stock trading Friday.

In the week ahead, despite the market fully pricing-in a rate hike, analysts expect that the FOMC meeting will be the main event, followed closely by the November CPI data and Retail Sales.

The Fed is going to deliver another quarter-point of tightening on Wednesday and while that aspect of the FOMC meeting is a foregone conclusion, the open question remains how will the Committee characterize the broader economic and inflation outlook. And let us not forget the updated projections – including the dot plot. We’re not anticipating any significant changes to the Fed’s rate projections, although if anything the better core-CPI prints (i.e. not disappointing in August and October) could bias the 2018 dots a touch higher. That’s more of a risk than a call per se, as we expect Yellen will be content not to rock the boat as she drops the mic on the way to her first-quarter speaking tour As for the economic data, the inflation reports will be the most relevant and with core-CPI seen increasing +0.2% in November, the yearly pace is expected to remain steady at 1.8%. We’re viewing this week as an important test of the notion that even the return of moderate inflation won’t materially challenge the flattening bias. As a point of clarity, an as-expected or higher core-inflation print will be met by an initial steepening of the curve – that much is intuitive. What remains to be seen is if that marks the beginning of a broader reversal of the recent flattening trend. This is of particular interest to us because our yield forecast for next year is based on the assumption that the market is entering a traditional mid-cycle trading pattern in response to increases in year over-year inflation gains

Tel. (+357) 250-288-6163 general@vinsonfinancials.com www.vinsonfinancials.com

Financial Market Review for December 11 2017 In the US, The Federal Reserve is widely expected to deliver its third and final rate increase of 2017 in the coming week and the stock market does not seem to even blink an eye about it.

In part, that’s because the long-telegraphed move is nearly 100% priced in, according to CME’s FedWatch tool.

The S&P 500 SPX, +0.55% is back in record territory, having recovered from a technology selloff to end the last week on a positive note. For the year, the benchmark index is up more than 18%, largely driven by stellar earnings growth and a favorable economic backdrop.

Fed policy is still reasonably accommodative and investors are not paying too much attention to rate hikes at this stage,” said Jack Ablin, chief investment officer at BMO Private Bank.

Investors are not only paying too little attention to the Fed, they may also be underestimating the pace of future rate hikes. According to the Fed funds futures market, investors expect only about two rate increase by the end of 2018.

Meanwhile, the Fed’s so-called dot plot suggests policy makers are planning to deliver four rate hikes by the end of next year.

U.S. equity investors have also taken in stride the Fed’s plans to shrink its balance sheet, which it began unwinding in October, and the departure of Chairwoman Janet Yellen, who is set to be replaced by Jerome Powell, a member of the Fed’s board of governors, in February. That means the December meeting is Yellen’s last.

The November employment report released Friday showed that the U.S. economy added 228,000 jobs, while the unemployment rate was unchanged at 4.1%. Wage growth, at 0.2%, however, remained tepid.

While stagnant wages are not particularly good news for consumers and worker, they are excellent news for corporations.

Next week investors will get a fresh batch of indicators on the economy.

Inflation data are on tap in the coming week. The November producer-price index is due on Tuesday, while the consumer prices index is set for release on Wednesday.

The Fed’s two-day policy meeting will end on Wednesday, with the announcement of its policy decision at 2 p.m. Eastern. The announcement will be followed by Yellen’s last news conference as Fed chief. at 2:30 p.m.

Other data highlights include retail sales and weekly jobless claims on Thursday, along with import and export prices and business inventories. Import Export prices as well as Business inventories are due the same day.

The December Empire State index is due on Friday, along with November data on industrial production and capacity utilization.

View our full economic calendar for a daily roundup of major economic events.

Tel. (+357) 250-288-6163 general@vinsonfinancials.com www.vinsonfinancials.com