Emergency Fed Meeting Spells Volatility

Daily Analysis - 11/04/2016

Emergency Fed Meeting Spells Volatility

Crumbling fundamentals are getting harder to ignore in the United States, with almost $20 trillion in government debt, overbought and overvalued equities and a silver lining in labour that is most likely somewhat farcical – fueled by part time jobs, hardly an indicator for economic health. The situation in oil, Japan, China and the Euro Zone also drag on the economy's trajectory, spelling some serious troubles for the US in 2016. For these reasons and more, the Fed has called for an emergency meeting last week to take place today to formulate policies to deal with the volatile situation Speculators, keen to take advantage of the difficulties faces by policymakers, are expecting that either today or during the regularly scheduled late-April meeting, Fed members will take the rate hikes announced late last year off the table or even to implement QE4. Only time will tell, but investors in the dollar, oil, equities and more will be watching for any news on the Fed's emergency meeting today .

Germany Trade Surplus in February Widens

Germany's trade surplus for the month of February widened more than expected with exports making strong gains, according to data released by the Federal Statistical Office on Friday. Germany's trade surplus, on a seasonally adjusted basis expanded 19.8 billion euros in February, following January's downward revised 18.7 billion euros. Analysts were expecting to see a trade surplus of 18.0 billion. Germany's exports increased 1.30% from January while imports increased a meager 0.40%. Germany's current account balance which measures the economy's financial position vis a vis its trading partners showed a 20.0 billion euro surplus in February, non-adjusted, beating estimates of 16.4 billion. Compared to a year ago, Germany's trade balance was 16.3 billion euros.

Swiss Economy Experiences Deflation for 17th Consecutive Month

Inflation data from Switzerland, released on Friday showed that the economy continues to run in a deflationary mode for the 17th month in a row. Consumer prices in Switzerland fell 0.90% on a year over year basis in March, gaining momentum after consumer prices fell 0.80% in February. On a monthly basis, the Swiss CPI managed to edge higher, rising 0.30%, matching estimates and up from 0.20% in February. Earlier last month, the Swiss National Bank revised its forecasts anticipating inflation to dip more than it had previously expected. The SNB expects to see inflation running at -0.80% in 2016, down from earlier forecasts of 0.50%.

UK Factory Output Falls More Than Expected

In signs that the UK economy is losing momentum, its factory output fell in the first quarter of 2016. Data released by the Office for National Statistics on Friday showed that UK's manufacturing output fell 1.10% in February and was down 1.80% from the previous year. The declines in manufacturing were more than what analysts had expected. The slump in manufacturing reinforces expectations that the UK's manufacturing sector continues to weaken with the steel sector leading the declines. Steel production saw the sharpest declines after the recent announcement by Tata Steel that it was looking for a buyer for its UK operations which puts at risk over 15,000 jobs. Industrial production was also weaker, falling 0.30% in February, down from a downward revised print of 0.20% in January and falling 0.50% on a year over year basis.

Canada Jobs Data Surprise Upward in March

Although considered to be volatile, Canada's jobs data in the month of March came out surprisingly better. The economy added 40.6k jobs in the month, mostly from an increase in full time positions in the private sector. This pushed Canada's unemployment rate lower to 7.10% during the month, down from 7.30% in February, according to data from Statistics Canada. The data surprised to the upside as analysts expected to see Canada’s unemployment rate remain unchanged at 7.30% while expecting to see only 10.4k jobs being added during the month. Overall, in the first quarter, Canada's economy added 32.6k jobs mostly due to the March report, offsetting the previous two weak months. This positive data comes ahead of the Bank of Canada's meeting due next week in which no changes to monetary policy are expected.