Morning Update – 15/06/2017 – by Arjun Lakhanpal

Morning all.. Wall closed around unchanged in a choppy session after the Fed hiked as fully expected.. Equity investors not sure if they should sell due to weak data or buy as the data is poor enough to stall any further hikes!! Markets rather confused but one thing is clear, bond investors don’t see much growth ahead as the curve flattened again and the dollar subsequently fell. Asian markets were fairly quiet with the Nikkei down just 0.13% and HK down 0.8%.. Due to the flat yield curve we saw banks slump and oil touched the lowest level since November as inventories rose again. Bonds rallied amid lingering inflation concerns even after Federal Reserve Chair Janet Yellen suggested weak readings won’t persist. Energy and raw-material shares had the biggest declines on the MSCI Asia Pacific Index as oil traded below $45 a barrel. Australian bonds followed a rally in Treasuries as data showed U.S. consumer prices excluding volatile food and fuel had the smallest year-over-year gain since May 2015. U.S. equity futures fell on a report that investigators are probing whether President Donald Trump attempted to obstruct justice. The Aussie dollar jumped after an encouraging jobs report. Fed: hiked 25bp with Kashkari only dissenter (as expected); 2019 dot lowered 0.1pp to 2.9%, all other dots unchanged; increased 2017 GDP f/c by 0.1pp to 2.2%, other GDP f/c’s unch; expects to implement b/s normalization this year, initially trimming reinvestments in Tsys by $6bn/month, MBS by $4bn/month; cut to reinvestment expected to expand quarterly until $30B/month for Tsys, $20B/month for MBS; does not specify long run size of b/s, would suspend normalization and use all tools if economic conditions change; near term risks appear roughly balanced, expects inflation to remain below target at 1.6% in near term, monitoring closely; 2017 inflation f/c lowered by 0.2pp to 1.7%, all other inflation f/c unch; lowers employment f/c’s to 4.3% in 2017 (from 4.5%), to 4.2% in 2018 (from 4.5%), to 4.2% in 2019 (from 4.5%), unch in longer run; will reinvest principal payments from its holdings until rate normalization is well under way.. This morning we get UK Retail sales which could be a big event and then later the BoE meeting.. Good luck..