Markets in a Flash
· Strength in the USD across the board today, most notable against the GBP which is off over 1% after the RICS report data.
· The UK housing market is showing signs of weakness, with the first drop in prices in a year according to the RICS report. Fears of a housing led double dip recession have been heightened.
· Over 14 million people are likely to be effected by the floods in Pakistan which many experts say will have a more devastating human cost than the Haiti earthquake and the 2004 Asian Tsunami
· Stock index futures are weaker ahead of the Federal Reserve’s meeting on monetary policy, this weakness in the futures has been heightened by weaker than expected import data from China.
· Weaker than expected import data out of China led to a -1.5% sell off in the Hang Seng Index.
· Commodities are taking a hit today with Brent crude down 1.9%, Cocoa futures the big loser thus far off -3.85%. Natural Gas showing the only gains in the energy sector up 0.4%
News focus
FOMC Announcement
The FOMC policy meeting is expected to leave the fed funds target unchanged at a range of zero to 0.25%. With fears of a double dip recession on the horizon traders will be looking for hints of additional quantitative easing and for changes in the Fed’s view of the economic environment.
Just Released
0830ET – Productivity and Costs
Nonfarm productivity – Q/Q change - SAAR
Previous 2.8% Consensus Range -0.8% to 2.5%
Consensus -0.0% Actual -0.9%
Unit Labor Costs – Q/Q change SAAR
Previous -1.3% Consensus Range -1.0% to 2.0%
Consensus 1.5% Actual 0.2%
Productivity measures the growth of labor efficiency in producing the economy's goods and services. Unit labor costs reflect the labor costs of producing each unit of output. Both are followed as indicators of future inflationary trend. Productivity growth is critical because it allows for higher wages and faster economic growth without inflationary consequences. In periods of robust economic growth, productivity ensures that inflation will remain well behaved despite tight labor markets. Productivity growth is also a key factor in helping to increase the overall wealth of an economy since real wage gains can be made when workers are more productive per hour.
0855ET – Redbook
Store Sales Y/Y Change
Previous 3.0% Actual 3.0%
A weekly measure of sales at chain stores, discounters, and department stores. It is a less consistent indicator of retail sales than the weekly ICSC index.
Coming up Today
1000ET – Wholesale Trade
Previous 0.5% Consensus 0.5%
Wholesale trade measures the dollar value of sales made and inventories held by merchant wholesalers. It is a component of business sales and inventories.
14:15ET – FOMC Meeting Announcement
Federal Funds Rate
Previous 0 to 0.25% Consensus 0 to 0.25%
The Federal Open Market Committee (FOMC) is the policy-making arm of the Federal Reserve. It determines short-term interest rates in the U.S. when it decides the overnight rate that banks pay each other for borrowing reserves when a bank has a shortfall in required reserves. This rate is the fed funds rate. The FOMC also determines whether the Fed should add or subtract liquidity in credit markets separately from that related to changes in the fed funds rate.
The Fed determines interest rate policy at FOMC meetings. These occur roughly every six weeks and are the single most influential event for the markets. For weeks in advance, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.
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