Daily Market Color

FOMC Minutes Stress Patience

 

FOMC Minutes Summary
The minutes from the Fed’s January 29-30 meeting were released today, providing financial markets with further clarity around the dovish shift in the Committee’s stance. Details of the text included:

  • Acknowledgement of risks to US growth from slowing Chinese & European economies, global trade tensions, and fading benefits of fiscal stimulus

  • General consensus to cease the shrinking of the Fed’s balance sheet by the end of 2019, specific timing remains uncertain

  • Stressing of patience/data dependency in determining further interest rate hikes, December’s median forecast of two rate hikes in 2019 is no longer the base case

  • Participants were relatively split as to whether any rate hikes in 2019 would be appropriate given the current outlook

 

 

Equity markets were choppy following the FOMC minutes release before ultimately finishing higher on the day. The DJIA (+0.24%) posted the largest gain among the three major stock indices, and the Nasdaq (+0.03%) extended its winning streak to eight consecutive days. US Treasurys held within a tight range throughout the trading session, with yields/rates inching 1-2bps higher across the curve.

 

 

Crude at 3-Month High
WTI crude futures gained 1.5% to $56.92/barrel – matching the highest level since November. Crude prices continue to add to the 25% gain YTD, driven largely by the dedication of OPEC members to maintain output cuts, along with persistent political drama in Venezuela and Iran. Earlier today, Saudi Energy Minister Khalid al-Falih said he was hopeful that the crude market would be balanced by April.

 

 

Trade Talk
While there wasn’t much progress to report on the US-China negotiation front, this afternoon President Trump reminded financial markets of the disconnect between the EU and US. After meeting with Austrian Chancellor Sebastian Kurz earlier today, Trump reinforced the possibility for the US to levy duties on car imports from the EU should the two sides be unable to reach an accord. “We’re trying to make a deal. They’re very tough to make a deal with – the EU,” Trump explained. “If we don’t make the deal, we’ll do the tariffs.” His words somewhat contradict those of European Commission President Jean-Claude Juncker, who earlier this week announced that there would be no additional tariffs on EU auto imports for the time being. The US dollar held near unchanged against the euro during today’s trading session at $1.135/euro, near its strongest level in the past year and a half.