Wednesday Morning Cheat Sheet: 3 Stories Moving Markets
The markets were up in Asia overnight. Catalyzed by strong earnings and dwindling economic headwinds, Japan’s Nikkei rose 2.28 percent to 17-month highs above 11,100. The Hang Seng climbed 0.71 percent, while the S&P/ASX 200 increased a modest 0.16 percent.
The markets were mixed at mid-day in Europe, with London’s FTSE 100 fighting for fractional gains. European economic confidence indicators have strengthened alongside the euro, which traded above $1.35 for the first time since 2011. Germany’s DAX was off about 0.12 percent, and the STOXX 50 was off 0.16 percent.
U.S. futures at 8:30 a.m.: DJIA: 0.00%, S&P 500: –0.11%, NASDAQ: +0.07%.
1) Expectations are low for the Bureau of Economic Analysis’s preliminary report on fourth-quarter gross domestic product. Consensus estimates have come in a range between 0.5 percent growth and 2.6 percent growth, with a mean target of 1 percent growth for the quarter.
If these estimates are correct, then the U.S. economy grew at its slowest pace in nearly two years. After healthy growth of 3.1 percent in the third-quarter, fourth-quarter activity was likely slowed by old-hat political dysfunction and the economic uncertainty that brewed in its wake. The report is due at 8:30 a.m.
2) The Federal Open Market Committee is expected to leave policy rates unchanged at its post-meeting announcement today at 2:15 p.m. The federal funds rate, which was lowered to approximately zero at the beginning of 2009, is likely to remain there until labor market conditions improve.
This means that the Federal Reserve’s balance sheet, which has already grown to over $3 trillion, is likely to grow by at least another $1 trillion as it continues to absorb $85 billion in assets every month and pump liquidity into the nation’s economic engine. But as the Fed’s balance sheet grows, the on-going asset purchases produce diminishing returns, and the official unemployment rate flat lines, many observers have called for a change in strategy.
3) It’s a big week for employment statistics, but there’s not a lot of excitement. The ADP National Employment Report is due out today at 8:15 a.m., followed by weekly unemployment claims on Thursday, and then the big Employment Situation report on Friday morning at 8:30 a.m.
Economists are estimating that the ADP report will show a gain of 172,000 private-sector jobs, slightly above the 150,000 average over the past two years. Combined with estimates for 185,000 non-farm jobs to be reported on Friday, the U-3 unemployment rate could tick down to 7.7 percent.
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