Asian Equities Higher after Fed Vote

Asian shares rose for a third consecutive day on Friday, and the dollar remained on the back foot against the region’s currencies as investors bet U.S. interest rates will not as rise quickly as expected.”This removes a source of uncertainty for Asian markets in the near term and should be a positive factor going ahead, though the Greek factor will temper any optimism, ” said Stephen Chiu, a strategist at Mitsubishi UFJ Financial Group in Hong Kong.

A moderate recovery in the U.S. economy in previous months had raised concerns the Federal Reserve would strike a hawkish stance at Wednesday’s meeting, but its cautious tone sparked a sense of relief and prompted investors to snap up risky assets.  A broad index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.6 percent while Japan’s Nikkei .N225 rose 0.9 percent from a one-month low set on Thursday.

Major U.S. share indexes .SPX .DJI jumped about one percent, with the Nasdaq Composite .IXIC finally erasing its last standing milestone from the dot-com era to set a record intraday high.  While analysts concluded the Federal Reserve is still on track for September to implement its first rate hike since the global financial crisis, fixed income derivatives markets such as Fed fund futures expected the first rate increase only in December.

Reuters

Read More

EZ Sets Emergency Summit on Greece

Euro zone leaders will hold an emergency summit on Monday to try to avert a Greek default after bank withdrawals accelerated and government revenue slumped as Athens and its international creditors remain deadlocked over a debt deal.  Finance ministers of the 19-nation currency bloc failed to make any breakthrough on a cash-for-reforms agreement at talks in Luxembourg on Thursday, just 12 days before Greece must make a crucial debt repayment to the International Monetary Fund.

“Regrettably … too little progress has been made. No agreement is in sight,” Jeroen Dijsselbloem, chairman of the Eurogroup, told a news conference. Ministers sent a strong signal that it is up to Greece to make new proposals, he said.  The European Central Bank told the meeting it was not clear whether Greek banks would be open on Monday, officials said.

The ECB’s governing council will hold a special conference call on Friday – the second in three days – to consider adding more emergency liquidity for Greek banks facing a quickening drain on their cash, two persons close to the situation said.  European Council President Donald Tusk said in a statement he had summoned heads of state and government of the euro area to meet in Brussels at 1700 GMT on Monday to discuss Greece “at the highest political level”.

Reuters

Read More

Fed May Rise Just Once in 2015

The question of how quickly the Federal Reserve should raise rates is dividing normally like-minded policymakers at the U.S. central bank, pitting those who favor two hikes this year against a growing number of those who want to stop at just one.  That shift, and the very real possibility that Fed Chair Janet Yellen may be one of the five who now prefer a single rate hike in 2015 rather than among an equal number who prefer two, is bolstering the view that the Fed may not deliver until late in the year.

The Fed has kept interest rates near zero since December 2008, and on Wednesday unanimously voted to keep them there. Behind that unanimity rages a debate over how long that state of affairs should last.  “While we cannot be certain, our best guess is that Fed Chair Yellen now anticipates only one increase this year – an important shift in the committee’s center of gravity,” Goldman Sachs economists Jan Hatzius and Zach Pandl wrote in a note advising clients they now expect the Fed to wait until December to raise rates, from September previously.

“If Yellen is in the one-hike camp, she is the decider, and the other governors will likely vote in deference to the chair,” said Kevin Logan, chief U.S. economist at HSBC Securities, which also expects the Fed to hike rates only once this year, in December.  New forecasts from the Fed’s 17 policymakers released after the central bank’s policy-setting meeting this week suggest four officials who in March recommended two rate hikes this year now want only one.

Reuters

Read More

BOJ Keeps Upbeat View of Economy

The Bank of Japan kept monetary policy steady and maintained its upbeat assessment of the economy on Friday, signaling its conviction that inflation will hit its 2 percent target without additional monetary stimulus.  As widely expected, the BOJ reiterated its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen ($648 billion) through purchases of government bonds and risky assets.

The policy board made the decision by an 8-1 vote.  “Japan’s economy continues to recover moderately,” the central bank said in a statement.  It also said it will cut the number of policy-setting meetings to eight each year, from the current 14.

BOJ Governor Haruhiko Kuroda will hold a news conference at 3:30 p.m. (0230 ET) to explain the policy decision.  The BOJ has left policy unchanged since expanding stimulus in October last year to prevent slumping oil prices, and a subsequent slowdown in inflation, from delaying a sustained end to 15 years of deflation.

Reuters

Read More

U.S. Consumer Prices Increase Strongly

U.S. consumer prices in May recorded their largest increase in more than two years as gasoline prices surged, suggesting the drag on inflation from lower oil prices was fading.  Other data on Thursday showed the economy was regaining momentum after stumbling in the first quarter. The number of Americans filing new applications for unemployment benefits fell last week to a near 15-year low and factory activity in the mid-Atlantic region accelerated to a six-month high in June.

Price stability and a strengthening economy, highlighted by the tightening labor market, likely will push the Federal Reserve a step closer to raising interest rates later this year. Still, rate hikes will probably be gradual as a strong dollar continues to dampen underlying price pressures.  “We think inflation will grind higher over the summer and open the door to a September rate hike. At the same time, low underlying inflation pressures mean the tightening cycle will only be gradual,” said Thomas Costerg, a U.S. economist at Standard Chartered Bank in New York.

The Consumer Price Index rose 0.4 percent last month after gaining 0.1 percent in April, the Labor Department said. That was the largest increase since February 2013, and left the CPI unchanged in the 12 months through May after a 0.2 percent yearly decline in April.  While energy prices are stabilizing, a strong dollar is weighing on underlying inflation pressures.

Reuters

Read More

BOJ Remains Steady

The Bank of Japan largely stayed the course in its policy decision Friday, sticking with its current level of monetary easing, but it also took steps to improve its transparency.

The central bank also plans to reduce the number of policy meetings to eight times a year from the 14 currently, while increasing the number of economic outlook reports to four from two currently.

In an 8-1 vote, the central bank pledged to increase base money at an annual pace of 80 trillion yen ($660 billion) through purchases of government bonds and risky assets.

CNBC

Read More