Fed’s Fischer sees inflation rebound, allowing gradual rate hikes

30 Aug 2015 | Author: | No comments yet »

Fed says rate hike next month hinges on market volatility.

What once seemed a sure bet – that the US Federal Reserve would raise interest rates in September – suddenly appears less certain following a wild week of stock market turbulence.

Jackson Hole, Wyoming: The Federal Reserve on Friday left the door open to a September interest rate hike even while several US central bank officials acknowledged that turmoil in financial markets, if prolonged, could delay the first policy tightening in nearly a decade.Oil surged, capping the best two-day rally since 2009, while U.S. equity investors found some relative calm in a turbulent week as Federal Reserve officials meet at Jackson Hole. Some top policymakers, including Fed Vice Chairman Stanley Fischer, said recent volatility in global markets could quickly ease and possibly pave the way for the U.S. rate hike, for which investors, governments and central banks around the world are bracing.

However, he says as and when the Fed hikes rate, it will be a gradual process. “The first move presumably will be from zero to 25 basis points and then 25 to 50, which means that our interest rate will still be below the British rate,” he adds. Fischer’s message: Incoming economic data and market developments over the next two weeks will play crucial roles in determining whether the Fed raises interest rates at its September meeting. He says: “Market volatility does affect the timing of a decision you might want to make.” However, he expects a reverse in the current global situation soon. In an interview Friday with CNBC, Fischer acknowledged that before the recent market volatility, ”there was a pretty strong case” for a rate hike at the Sept. 16-17 meeting, though it wasn’t conclusive. U.S. stock indexes ended largely unchanged, capping a week that included both the market’s worst day in four years and biggest two-day gain since the 2007-2009 financial crisis.

The abrupt fall in Dow last week was a reaction to the crash in Chinese market, he says adding that: “It was a reaction to something, which had potential to be very big.” He adds that China’s economy will have minute impact on US exports. The firm oversees $76 billion. “There has been a lot of price action in both directions, perhaps traders just make a chance to catch their breath.” Global equities lost as much as $8.4 trillion in value after China’s unexpected devaluation of the yuan on Aug. 11 spurred concern the world’s second-biggest economy was on the brink of a deeper slowdown, damping demand for raw materials and spurring a selloff in developing economies.

Louis Fed President James Bullard told Reuters he still favored hiking rates next month, though he added that his colleagues would be hesitant to do so if global markets continued to be volatile in mid-September. The cause of concern, he says, is the “interactions among China and other countries will amount jointly to something that would have an impact on us.” A: I think it’s early to tell. The index’s 0.9 percent gain for the week masks a volatile period in which the S&P 500 plunged the most since 2011 to enter a correction, only to rally more than 6 percent over two days. Fischer said his ”confidence is pretty high” that low levels of inflation will head toward the Fed’s target of 2 percent as temporary effects from a big drop in energy prices fade. The U.S. government reported this week that the economy grew at a 3.7 percent annualized pace in the second quarter, sharply higher than its previous estimate, and that consumer spending, which accounts for more than two-thirds of economic activity, rose again in July.

The yield on 10-year Treasuries was little changed at 2.19 percent. “We need to see a bit of consolidation given the recent rally,” said Gunther Westen, who helps oversee about $28 billion as head of asset allocation and fund management at Meriten Investment Management GmbH in Dusseldorf, Germany. “There’s still insecurity. The Fed is still looming over the markets.” Fed officials gathered in Jackson Hole, Wyoming, are weighing when to begin raising interest rates for the first time since 2006.

Atlanta Fed President Dennis Lockhart, a centrist who has become less resolute about a September rate hike as markets have tumbled, told Bloomberg TV that it was reasonable to see the odds of a move next month as roughly even. One idea appearing to gain ground on Friday hinged on the Fed raising rates once or twice and then holding off until inflation started to rise to its 2 percent target. Esther George, president of the Kansas City Federal Reserve, which sponsors the Jackson Hole conference, said she was taking a ”wait and see” approach. ”We’ve seen data that suggests the economy is strong enough to act. A: If the relatively small depreciation, which happened with the Chinese devaluation, with the relatively small appreciation, it will have some small impact.

Reports today showed Americans kept spending in July, and sentiment barely wavered this month as stocks plunged, keeping intact prospects that consumers will continue to drive growth. So we’ll see what happens by the September meeting,” George, who doesn’t have a vote on the Fed’s policy committee this year under the committee’s rotating system, told Fox Business Network.

The Fed decision has drawn unusually intense interest from both foreign central bankers, who will have to respond, and from Americans on both the right and left. The Fed needs to re-think “full employment in a way that recognizes the high joblessness of black and Latino communities,” Sarita Turner of PolicyLink told about 60 advocates, noting that U.S. joblessness among blacks is twice that of whites. Q: If those factors are transitory and you have confidence that they are transitory, should that then not stop you from taking action on rates, because you are confident that these will go away. Stock markets will be subject to higher volatility for weeks, according to a note Thursday from JPMorgan Chase & Co. derivatives strategist Marko Kolanovic. Bigger moves are likely at the beginning and end of sessions as those investors seek to tweak holdings to take into account this month’s correction, Kolanovic said.

While the Shanghai Composite Index jumped 4.8 percent, capping a 10 percent gain across two days, the Hang Seng China Enterprises Index dropped 1.1 percent in the final hour of trading in Hong Kong. China intervened to shore up its volatile equity market late Thursday, according to people familiar with the matter, while a commentary in the official Xinhua News Agency said developed-nation monetary policies were to blame for global financial-market volatility. Policy makers are said to be trying to end a stock rout before a Sept. 3 military parade that will celebrate the 70th anniversary of the World War II victory over Japan. You see that all the time, you see that particularly in the ability to absorb unemployed which has been going on steadily for six-seven years – that we are getting back to normal and at some point we will want to show that by beginning to normalize interest rates. Prices climbed 12 percent this week, the biggest advance since February 2011, though they are still down 15 percent for the year on concern a supply glut will persist.

Q: It’s sort of interesting the last couple days, you had this huge – our research showed that we moved 10,000 points in the Dow, but some of that was up and some of that was down. Q: So I think everybody’s going to want to know an answer to maybe a more direct question, if you don’t mind – which is September, when I hear you talking, is still alive as a possibility for raising rates?

We have got a little over two weeks before we make the decision and we have got time to wait and see the incoming data and see what exactly, what is going on now in the economy. Q: Wouldn’t you think there would be an overwhelming case though in one way or the other that you would be sure and confident that look, there’s this, you know, unimpeachable case that it’s time to go forward? And they are regarded as doing quantitative easing, etc, etc. so we are not moving from a wonderfully extremely expansionary in monetary policy to a tight one.

Q: What about concern that what the market would do is immediately price or bring forward the whole trajectory of rates and so that rather than looking at just a 25 basis point increase in the borrow in cost for corporations, you are looking at a much larger one?

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UPDATE 1-Western Refining to buy rest of Northern Tier

20 Jan 2016 | Author: | No comments yet »

JPMorgan Chase & Co. Upgrades Northern Tier Energy LP (NTI) to “Neutral”.

Under the deal, Northern Tier unit holders would receive $15 a unit in cash and 0.2986 Western Refining share for each common unit held, or roughly $26.21 a unit based on Monday’s close. EL PASO, Texas and TEMPE, Ariz., Dec. 21, 2015 (GLOBE NEWSWIRE) — Western Refining, Inc. (NYSE:WNR) and Northern Tier Energy LP (NYSE:NTI) today jointly announced that they have entered into a merger agreement whereby Western will acquire all of NTI’s outstanding common units not already owned by Western. Northern Tier Chief Executive Dave Lamp in prepared remarks Monday said that the MLP model “has not been rewarded by the equity market, as evidenced by the historical disconnect between NTI’s high yield and low unit price.” “With a simplified corporate structure and diverse geographic base, the new Western will be well positioned to unlock additional value for shareholders,” Mr. As an alternative to the cash and stock consideration, each NTI unitholder may elect to receive, per NTI unit, either $26.06 in cash or 0.7036 of a share of WNR.

Assuming completion of the proposed transaction, NTI will become a wholly-owned subsidiary of WNR and NTI common units will cease to be publicly traded. Jeff Stevens, President and CEO of WNR said, “The merger of Western and NTI will result in the combined entity owning three of the most profitable independent refineries on a gross margin per barrel basis, with direct pipeline access to advantaged crude oil combined with an integrated retail and wholesale distribution network. The terms of the merger agreement were approved by the WNR Board of Directors and the Conflicts Committee of the Board of Directors of NTI’s general partner, which negotiated the terms on behalf of NTI. Four investment analysts have rated the stock with a hold rating, five have assigned a buy rating and one has issued a strong buy rating to the stock.

The call and slide presentation can be accessed on the Investor Relations section of Western’s website, www.wnr.com, and on the Investor Relations section of Northern Tier’s website at www.northerntier.com. The Company has refining, retail and logistics operations that serve the Petroleum Administration for Defense District II (PADD II) region of the United States. Goldman Sachs & Co. acted as financial advisor to Western, and Vinson & Elkins, Davis Polk & Wardwell and Richards Layton & Finger acted as legal counsel to Western. This press release includes “forward-looking statements” by Western (which are protected as forward-looking statements under the Private Securities Litigation Reform Act of 1995) and by NTI.

The Company’s retail segment operated 165 convenience stores under the SuperAmerica brand and also supported 89 franchised convenience stores, which are also operated under the SuperAmerica brand. These statements are subject to the risk that the merger is not consummated at all, including due to the inability of Western or NTI to obtain all approvals necessary or the failure of other closing conditions, as well as to the general risks inherent in Western’s and NTI’s businesses and the merged company’s ability to compete in a highly competitive industry.

If you are reading this article on another website, that means this article was illegally copied and re-published to this website in violation of U.S. and International copyright law. In addition, Western’s and Northern Tier’s business and operations involve numerous risks and uncertainties, many of which are beyond Western’s and NTI’s control, which could materially affect their respective financial condition, results of operations and cash flows and those of the merged company.

The forward-looking statements are only as of the date made, and neither Western nor NTI undertake any obligation to (and each expressly disclaims any obligation to) update any forward-looking statements to reflect events or circumstances after the date such statements were made, or to reflect the occurrence of unanticipated events. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval in any jurisdiction where such an offer or solicitation is unlawful. Any such offer will be made only by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, pursuant to a registration statement filed with the SEC. The retail segment includes retail service stations, convenience stores, and unmanned fleet fueling locations in Arizona, Colorado, New Mexico, and Texas. Beyersdorfer (602) 286-1530 Michelle Clemente (602) 286-1533 Northern Tier Investor and Analyst Contact: Paul Anderson (651) 458-6494 Alpha IR Group (651) 769-6700 nti@alpha-ir.com Media Contact: Gary Hanson (602) 286-1777

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