(JPM on growth) The bigger financial story is the modest loss of growth momentum – the downshift is mild and comports w/normal seasonality (whereby growth tends to soften in Q1) but how this unfolds in the next several weeks will be much more important than what the Fed did/said on Wed.
(JPM on trade) Note that trade headlines sound a lot better than was the case just a few days ago – the steel/aluminum tariffs could wind up seeing a slew of exemptions (Canada, Mexico, Australia, Argentina, and the EU) and the China trade announcement (due out at ~12:30pmET this morning) will be relatively benign.
(Bloomberg) President Donald Trump is set to announce about $50 billion of tariffs against China over intellectual-property violations targeting more than 100 different types of products. China is preparing to hit back at Trump’s planned sweeping tariffs with levies aimed at industries and states where his supporters are concentrated, the Wall Street Journal reported. The predicament has left Europe scrambling to builddefenses: EU leaders meeting in Brussels will be vying for an exclusion promised to Canada, Mexico and Australia. The damage inflicted on the world economy by a global trade conflagration would total $470 billion by 2020, according to Bloomberg Economics estimates.
March 21 (Reuters) – The Federal Reserve raised interest rates on Wednesday and forecast at least two more hikes for 2018, signaling growing confidence U.S. tax cuts and government spending will boost the economy and inflation and lead to more aggressive future tightening. The U.S. central bank indicated that inflation should finally move higher after years below its 2 percent target and that the economy had recently gained momentum. Most Fed officials also expect the Fed would need to raise rates at least another three times next year. At the December meeting, officials projected around two increases would be needed in 2019. Inflation “is expected to move up in coming months and stabilize” around the Fed’s target, it said.
(JPM on Fed) While the Fed was dovish vs. expectations, there were hawkish pieces of the decision. Specifically, the UR forecasts were brought down a lot (although this didn’t translate into a huge increase in the PCE estimates) while the ’20 dot rose a lot (from 3.1% to 3.4% which puts it above the longer-run at 2.9%). Thus while the ’18 dot stayed unchanged (although only just barely), the ’18-’20 tightening path was hawkish.
(Bloomberg) It’s cheap and just about every investor is short the currency. That makes the dollar a screaming buy for Allianz Global Investors. The fund, one of Europe’s biggest, is betting against the trend on conviction that a turnaround is in the cards. Buying the greenback versus a basket of currencies including the euro and the Canadian dollar is one of Allianz’s strongest trades, now that gains following the election of Donald Trump as U.S. President in 2016 have reversed. That runs contrary to how traders are shaping up, with positioning the most bearish in four years, according to the latest CFTC data. The dollar is the worst performer among Group-of-10 currencies in the past year.
(Bloomberg) — Goldman Sachs Group Inc., for decades Wall Street’s dominant commodities trader, has lost its place among the top three banks in the sector for the first time, according to research group Coalition Development Ltd. Trading losses in natural gas and power dragged Goldman to its worst annual performance in commodities in its history as a public company last year, leading to a string of high profile exits from the bank’s raw-materials