Morning Update – 06/04/2017 – by Arjun Lakhanpal

Morning all.. After a strong start, US equities fell as FOMC minutes showed the Fed looking at removing stimulus by shrinking the massive balance sheet. This has been seen as driving stocks to recent highs for some years and its reduction may be a concern. S&P closed down 0.31%, way off its days highs. This had a knock-on effect in Asia where the Nikkei fell 1.67% with added pressure from a lower USDJPY which traded down to 110.28 just above major support at 110.00. FOMC minutes: Most saw move to reduce the balance sheet later this year, nearly all wanted portfolio unwinding tied to economic, financial conditions; most continue to see fiscal stimulus as an upside risk; downside risks from global factors have diminished; officials divided on letting inflation continue to rise to target; some wanted sustained return to 2% inflation target after year’s-long shortfall; others said inflation had met their goal, warranted faster pace of rate increases;  several cautioned that EU elections may pose risks; most saw a move to reduce their balance sheet “later this year”, preferred to end of phase out reinvestments in treasury & MBS assets; pushed back their expectations for the timing of fiscal policy changes; saw slower growth in Q1 compared to Q4, expected growth to move back up in Q2. Elsewhere we had Chinese: Caixin Services PMI: 52.2 vs 52.6 prior. Chinese: Caixin Serv PMI new biz: 52.2 vs 53.3 prior. Not much on the data front this morning and focus will be on the Trump/xi meeting tonight. Good luck…