James Barrineau (Schroders) | Emerging market bonds and currencies sustained serious damage in the 2013 “Taper Tantrum”, but are much better placed this time around. Some financial markets have reacted as if Federal Reserve (Fed) Chair Jay Powell rang the bell for tapering of easy financial conditions at the 16 June policy meeting. Investors have naturally dusted off the playbook from the last episode, the notorious “Taper Tantrum” that began…
MADRID | The Corner | Investors experienced the ECB’s stress tests hangover and were quite dovish throughout the Monday’s session. Apparently Tuesday won’t be any different and they will remain prudent until Wednesday, when the FOMC releases its conclusions. Markets expect the Fed to finish tapering, as well as an interest rates hike, experts at Link commented.
MADRID | The Corner | US corporate results from the third quarter might be around +4%/5% (earnings per share), but it is highly probable that European results will be weak. Also, there should not be great expectations on central banks to save the situation this time, except, possibly, a more “dovish” refocusing by the American Fed (the US central bank delayed an interest rate increase or even tapering, which would give support to markets).
SAO PAULO | By Marcus Nunes via Historinhas | For the last 16 months the Fed has been on “tightening mode”. This is very clearly reflected in the chart for inflation expectations above. When Bernanke started the “taper talk” in May 13 inflation expectations came down and stayed down. Following the June 14 FOMC meeting, dedicated to discussions of “policy normalization” inflation expectations dived! How can they be surprised with the consequences.
MADRID | The Corner |“Yabadabadu!,” US economist Justin Wolfers exclaimed on his Twitter account. The strong jobs report (unemployment rate declined to near a six-year low of 6.1% and non-farm payrolls rose by 288,000 last month)was released on Thursday gave a shot of optimism over the strength of the job market’s recovery. The Dow broke 17,000 for the first time. Will all this have any influence on the Fed’s tapering plans?
MADRID | JP Marín Arrese | The revised growth figure for the US economy in Q1 comes as a nasty surprise. It has dampened market sentiment worldwide. Earlier assessments blaming bad weather the moderate setback no longer hold when faced with a downturn close to 3%. Even discarding a fallback into full-fledged recession, it undoubtedly points to a markedly weaker performance than expected. The Fed tapering strategy is confronted with a baffling dilemma.
MADRID | By Julia Pastor | The ball is now on Janet Yellen’s court after BoE’s governor Mark Carney warned investors to get ready for interest rates’ hikes. What can we expect if the US Fed follows suit?
SAO PAULO | By Marcus Nunes via Historinhas | Recently I showed this chart [see above] to press the point against the conventional wisdom that the purpose of the sequence of QEs was to lower long term rates.
SAO PAULO | By Marcus Nunes | The Fed has never been comfortable with QE3; Many thought that QE ineffective; Bernanke felt compelled to clear the path for Yellen… But it has boosted “Forward Guidance” to make up (or more than make up) for the “taper”.
MADRID | By Luis Arroyo | This week is tapering week, and we will see the Fed’s first step towards a reduction of the quantitative easing. There is consensus about what the economic data show: every single indicator (except inflation) are more and more vigorous.