Originally published by Rivkin Securities
The much anticipated vote on repealing Obamacare was delayed on Thursday as Republican leaders required more time to reach an agreement with members within their own party. The vote may now be held tonight or delayed further. In reaction US equity markets moved lower with both the S&P 500 and Nasdaq 100 down -0.11% and -0.23% respectively as delays in repealing healthcare reforms are seen as delaying tax cuts and fiscal stimulus. Meanwhile the US Dollar Index rose +0.08% along with the ten-year treasury yield which gained +2.5 basis points after Federal Reserve of San Francisco President John Williams suggested the potential for more than three hikes in 2017.
Williams is fairly centralist leaning although slightly dovish when it comes to monetary policy and therefore a good indication of which way the committee may lean in the coming months. Williams is not a voting member of the committee in 2017 but does participate in the deliberations. Speaking with the Wall Street Journal Williams noted that three or potentially more rate hikes make sense depending on how inflation and employment evolve. A growing topic is also the reduction of the Fed’s balance sheet, with Williams suggesting the Fed will be closer towards the end of this year, once they have raised rates a few more times.
The British pound jumped +0.30% following a rebound in retail sales following a disappointing reading in January. Sales excluding auto fuel (MoM Feb) increased +1.4% topping estimates for +0.4% although January was revised lower to -0.5%. Year-on-year sales increased +3.7%, higher than the anticipated +2.6% and prior reading of +1%. Both the two & ten-year UK yields spiked +4.7 & +5.4 basis points respectively and the FTSE 100 index gained +0.22%.
Elsewhere in Europe the ECB pointed to a growing confidence that the recovery in the Euro-zone will continue to broaden and support fairly robust growth momentum during the first quarter of 2017. Tonight we’ll see if that is in fact the case with French GDP and Euro-zone PMI reports released. The ECB also offered a final round of targeted long-term refinancing operations (TLTRO’s) to EU banks in the first step to towards slowly returning towards policy normalisation. That saw German bond yields rise with both the 2 year and 10 year yields gaining +2.7 and +2.2 basis points respectively.
Locally the S&P/ASX 200 finished +23.44 points or +0.41% higher on Thursday and we look set to start trading slightly higher this morning with ASX SPI200 futures up +5 points in overnight trading.
Data releases:
· French GDP (QoQ & YoY Q4) 6:45pm AEDT
· Euro-zone Manufacturing, Services & Composite PMI (MoM Mar) 8:00pm AEDT
· Fed’s Evans Speech 11:00pm AEDT
· Canadian CPI (MoM & YoY Feb) 11:30pm AEDT
· US Durable Goods orders (MoM Feb) 11:30pm AEDT
· Fed’s Bullard Speech 12:05am AEDT
· Fed’s Dudley Speaks 1:00am AEDT