Will the FED Raise Rates? Will Apple Earnings Boost the Market?

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It’s an incredibly busy week this week for global markets as we look ahead to big earnings and economic data. With President Trump making waves in his first 100 hours in the White House, let alone 100 days, there is a huge uncertainty risk for global markets at the moment as we continue to get market reaction on each executive order that is signed. However with normal economic data returning this week, and two of the FAANG stocks reporting, we could finally have some news to take the attention off the new President.

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Here are just a few of the big bits of data due for release this week that we should all be focussed on:

Bank of Japan Policy Meeting – Early morning Tuesday 31/01/2017

The Bank of Japan is set to keep monetary policy steady on Tuesday and seek to allay speculation of an early tapering of its massive stimulus, as recent bond market turbulence puts to the test its revamped policy framework that aims to control the yield curve. Japanese government bond yields spiked last week after the BOJ skipped a much-anticipated auction to buy short-term debt on Wednesday, leaving investors wondering about its intentions and casting doubt on its resolve to cap bond yields. Two days later, it surprised markets again by increasing bond purchases.

The BOJ says such adjustments to its market operations are aimed at getting markets accustomed to a decision it made last September, which was to shift its policy focus to interest rates from the pace of bond buying, sources say.

Kuroda probably won’t want to give markets the impression the BOJ is eyeing an early exit from its ultra-loose policy as that could turn around the current favourable weak-yen trend. The BOJ may consider raising its yield targets later this year, but only if yen declines become excessive and hurt households by pushing up grocery costs.

FOMC Meeting – Wednesday 01/02/2017  

The Fed will take a pass at this week’s FOMC meeting. The median policy participant forecasts just three 25bp rate hikes this year and incoming data offers no surprises to force one of those this month. March, however, remains in play. The three forecasted rate hikes is not a promise. It could be one hike or could be four or more. The actual outcome will depend on the path of actual economic outcomes and what those outcomes imply for the forecast.

The Fed is aware that crosscurrents in the economy – such as potentially significant changes to fiscal and economic policy – create substantial uncertainties about the course of monetary policy this year. From the most part this means that they are keeping their options open with Janet Yellen not wanting to focus too much on this month, but rather take an extended look at the state of fiscal policy.

So what does this mean for the March meeting? Well current probability it at 26.5% for a rate hike on 15th March however with more revelations likely out of the White House, the stance of the central bank could change a lot between now and then.

Apple (31/01/2017) and Facebook earnings (01/02/2017)

This week also sees the release of key stocks with both Apple and Facebook reporting this week. Gone are the days that the global equity markets are dominated by the big banks and big oil companies, these days we look towards what is known as the FAANG stocks. the FAANG’s are Facebook, Apple, Amazon, Netflix and Google (Alphabet).

This week sees the release of earnings  from two of these giants of the modern world as both Apple and Facebook both are expected to report bumper earnings in the next couple of days. Apple is expecting huge sales numbers on its new iPhone 7  to help[ boost earnings while Facebook is expecting a similarly good performance on the success of its advertising arm.

Highlights

– Fed, Bank of Japan and Bank of England all have meetings this week.
– Only a 4% chance of a hike at the FOMC
– Facebook and Apple both report their Q4 earnings with expectations high for both.
– President Trump continues to move markets with executive orders.
– Non Farm Payroll due for release on Friday.

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