Jan 11, 2019, by Lorcan Roche Kelly
President Donald Trump seems increasingly likely to declare a national emergency that would allocate funds for his border wall by diktat. Speculation increased after he closed off the only live negotiation on Capitol Hill aimed at resolving the ongoing shutdown, poised to become the longest in U.S. history. The pressure to end the federal financing freeze will increase today as many workers go unpaid.
Rate hike? What rate hike?
Federal Reserve Chair Jerome Powell said policy makers are “going to be patient and watching, and waiting and seeing” before adjusting interest rates again. Still, the bank is intent on cashing in on maturing debt rather than re-investing it to attain a “substantially smaller” balance sheet, he said. Analysts now see the once widely expected March rate hike as off the table with numerous Fed speakers increasing their dovish tones.
A barrel of West Texas Intermediate traded over $53 a barrel this morning and Brent crude was over $62 as the commodity’s run of gains extended to a record 10th session. With futures already entering a bull market after gaining more then 20 percent from the Dec. 26 low, Powell’s interest rate comments became the latest palliative to ease growth fears dogging the world’s biggest consumer of oil. Elsewhere, Mexico completed the world’s largest annual oil deal when it locked-in hedges for the year at $55 a barrel.
Overnight, the MSCI Asia Pacific Index gained 0.5 percent while Japan’s Topix index closed 0.5 percent higher, with the gauge capping its best week since September with sentiment lifted by Powell. In Europe, the Stoxx 600 Index was 0.1 percent higher at 5:50 a.m. Eastern Time in a fairly quiet trading session. S&P 500 futures pointed to a small loss at the open, the 10-year Treasury yield was at 2.713 percent and gold was higher.
Today’s monthly Treasury budget statement has been postponed due to the shutdown. We are now left with CPI for December at 8:30 a.m. where headline inflation is expected to slow to 1.9 percent, as the only notable piece of U.S. eco data for the session. At 1:00 p.m., Baker Hughes publishes the latest U.S. rig count, with investors watching for an increase due to strengthening crude prices.