March 21, 2018 by Cecile Gutscher
It’s Fed day, Facebook firestorm rages, and short-term funding costs at crisis levels create headaches. Here are some of the things people in markets are talking about today.
Jerome Powell will grab headlines today with an all but assured rate hike in his first meeting as Federal Reserve chairman. But look to the fine print for the biggest news. With a 25 basis-point rate rise seen as a done deal, the focus is on Powell’s path to tighter policy. Today he’ll get the chance to oversee a revision of the 2018 dot-plot forecasts that would see the central bank speed up the pace of increases to four from three, driven in part by Congress’s passage of a $1.5 trillion tax overhaul and $300 billion in spending.
Facebook Inc.’s woes are going from bad to worse. Investors unliked its stock to the point that it lost $60 billion in value after the disclosure that it released the personal data of 50 million users to an analytics firm that helped elect President Donald Trump. CEO Mark Zuckerberg may have to do a tour of European parliaments to appease lawmakers. The social-media giant says it would brief congressional committees. It also faces a class action suit from investors in San Francisco, claiming they lost money because of the Cambridge Analytica firestorm. Meanwhile, the Nordic region’s biggest bank won’t let its sustainable investment unit touch the stock. Zuckerberg is breaking his silence with plans to address employees Friday.
A tentative mood before the Fed had markets registering a mixed performance with the MSCI Asia Pacific Index 0.1 percent lower as of 5:52 a.m. Eastern Time. Japan’s Topix index closed 0.2 percent lower. In Europe, the Stoxx 600 Index dropped 0.1 percent with banks and travel companies among the biggest losers. S&P 500 futures pointed to a lower opening. Bonds were steady with the 10-year yield at 2.89 percent. Oil futures rose 0.5 percent and gold was higher.
Market tremors spurred by short-term dollar funding costs at crisis-era levels are reverberating from Riyadh to Sydney. The three-month London interbank funding rate rose to 2.25 percent Tuesday, the highest since 2008, thanks to technical factors including a deluge of Treasury bill issuance. That’s sparking a conundrum for policy makers in Saudi Arabia and Hong Kong, while forcing some foreign borrowers to tap domestic markets for funding. While investors, for now, are largely sanguine about the blowout in borrowing costs, Citigroup Inc. strategists warn a tightening of U.S. financial conditions is nigh.
Congressional Republicans missed another target to unveil their spending bill. Talks will continue as the Friday deadline to avert a third government shutdown this year nears. Disagreements persist over immigration, border security, tax breaks and a rail tunnel under the Hudson River between New York and New Jersey. Congressional leaders vowed to work through the weekend if necessary to approve the legislation before they break up for two weeks. If they can’t come to an agreement, they may need to pass another stopgap spending bill to keep the government open.