Macro events rolled out to next month

One down, one to go – one has been moved to next month and one to next week.

Fed
Source: Bloomberg

What’s spiking my interest

Fed – what did we learn? Rate hikes are still expected in 2015. The Fed is still dovish – this isn’t new news.

The Board’s dot plot expectations for December are for rates at 0.63% (unchanged). The dot plot for CY16 and CY17 was more dovish than the market expected, down 25 basis points for both.

The dot plot also shows a split between the expectations of one or two rate hikes by year end. I suspect two hikes this year, which would likely violate the rate ‘trajectory’ path Janet Yellen was at pains to highlight. She and the board want nothing to spook the economic growth story – two hikes would be too hard and too fast.

I also find it interesting that the market expectations in basically all economic activity metrics followed by the Fed were ahead of the FOMC’s estimates. Janet Yellen has not once shown she will turn hawkish ahead of the curve. Her modus operandi is dovish – period.

The market continued its 80% record of rising after a Janet Yellen press conference, swinging through 100 points to close up.

The conclusion from this morning’s US news: September lift-off is still the most likely scenario but only one rise is expected.

My concern around the Fed isn’t around the US economy spluttering. Emerging markets’ debt liquidity is mainly denominated in USD – but are they ready for the funding increases and likely liquidly drain that comes with tightening? Some would suggest not. Last year’s issue in India and Indonesia is a clear example of how it could play out.

Grexit: ‘Tsipras vows to reject unfair deal’ is the headline on all major news outlets. No deal is a given tonight. Is there a plan B?

China had another choppy day but finished in the green, snapping the three-day losing streak. Early indications for today are for another open to the downside. International watchers are continuing to use the term ‘bubble’ for Chinese equity markets.

ASX’s discount to the MSCI got a nice leg up yesterday – however, the intraday overperformance may see it giving back half of yesterday’s uptick. On the other hand, the discount is a short-term positive and one to be positioned for ahead of the end of the financial year.

ASX’s concession season continues to roll on. Its biggest scalp in Woolworth’s yesterday takes the total for the month to 11 (and counting). There are several more to come before the month is out too – mining services, discretionary and the media sectors are the most likely spaces to disappoint.

Ahead of the Australian open

We are currently calling the ASX down 17 points to 5578.

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