June 14, 2018, by Lorcan Roche Kelly
Today’s European Central Bank meeting comes down to one thing – whether the governing council decide to announce a timetable for the end of the bank’s asset purchase program this month, or wait until July’s meeting. With the euro-area experiencing a spate of weak economic data recently, there is no clear consensus among analysts as to when the ECB will set its QE unwind timetable. Today’s decision will also come with updated staff projections for the euro-area economy. The monetary policy announcement is due at 7:45 a.m. Eastern Time, followed by a press conference at 8:30 a.m.
Powell hawk (ish)
Speaking of press conferences, one interesting takeaway from yesterday’s Federal Reserve decision was the announcement that from January next year every monetary policy meeting at the bank will be followed by Chair Jerome Powell holding a Q&A with the media. Market reaction to the decision to raise rates by 25 basis points and indicate that there may be four hikes this year was to treat it as a hawkish hike. This morning, U.S. 10-year Treasury yields are trading pretty much unchanged from their pre-decision levels, so investors may be reassessing the message. There was a surprise for markets when the People’s Bank of China decided not to follow the Fed’s lead and held rates unchanged, signaling renewed confidence in yuan stability.
U.S. Secretary of State Mike Pompeo said that North Korea would not receive sanctions relief until after the country had completed nuclear disarmament, pushing back against suggestions in official North Korean media that the economic pressure on the country would soon ease. He said he was hopeful it could be achieved in the next two and a half years, timing that matches well with the U.S. presidential election cycle. Despite President Donald Trump saying the nuclear threat from Pyongyang is over, analysts believe Kim Jong Un may never give up any nukes.
Overnight, the MSCI Asia Pacific Index declined 0.9 percent while Japan’s Topix index closed 0.9 percent lower as the Fed decision and a threat from Trump to “strongly” crack down on trade with China rattled investors. In Europe, the Stoxx 600 Index was 0.5 percent lower at 5:45 a.m. as traders awaited the decision from the ECB. S&P 500 futures were little changed, the 10-year Treasury yield was at 2.952 percent, and gold was higher.
At 8:30 a.m., weekly initial jobless claims data is due, with expectations for 223,000 new claimants, in line with last week’s figure. Also at 8:30 a.m., U.S. retail sales data for May is due, with economists estimating an increase to 0.4 percent growth following April’s lackluster number. Earlier this morning, there was a positive surprise in U.K. retail sales with a 1.3 percent increase from April as good weather and the royal wedding gave stores a much needed boost.