MONEY MARKETS-Traders stick with views on Fed rate hikes

31 Aug 2015 | Author: | No comments yet »

4 Financial Stocks to Buy Ahead of Interest Rate Hike.

U.S. stock futures tumbled in early trade on Monday, partly due to comments that China’s government will no longer support the stock market via big purchases of stock. No wonder, the Chinese government intervened in the markets through large-scale buying last Thursday, which caused the Shanghai Composite index to move 5 percent higher during the last trading hour, a move that was repeated on Friday. According to market rumors, when the meeting of the Federal Open Market Committee (“FOMC”) will take place during Sep 16–17, the first rate hike in almost a decade will be announced. — A bystander accidentally shot by an undercover New York City police officer on Friday afternoon during an illegal firearms sting gone awry has died, the Police Department said on Saturday.

In my opinion, investors that are still interested in the Chinese markets over the short term could do well waiting until the ongoing market correction is over and stock prices reflect to a better degree the real economy. Given the recent selloff in equity markets and apprehensions about China’s economic slowdown, there are fresh concerns about the Federal Reserve’s decision to go ahead with the interest rate increase. In this context, on Friday, the Chinese National Bureau for Statistics (NBS) informed profits of major industrial enterprises (what they call “above designated size”) decreased by 2.9 percent on a yearly basis while profits of state-holding industrial enterprises “above designated size” decreased by 22.1 percent year-over-year, which continues to point to further slowing growth in China. Anyway, Goldman Sachs cut its forecasts for Chinese growth to 6.4 percent in 2016, down from 6.7 percent, while it expects growth to decelerate further as it now expects growth for 2017 at 6.1 percent (prior 6.5 percent), 5.8 percent in 2018 (prior 6.2 percent) and a growth rate coming in at around 5 percent in 2020-2024, and around 4.5 percent thereafter. If the people at Goldman Sachs are right, long-term investors could probably be better off not making their investment decisions based on “hope” Chinese growth accelerating again any time soon.

Authorities instead plan to pursue and punish those they believe responsible for “destabilizing the market.” Oil prices also fell with October crude futures down $1 cents, or 2.2%, to $44.22 a barrel. That said, at the Kansas City Fed Economic Symposium in Jackson Hole, Wyoming, Fed Vice-Chair Stanley Fischer made various prudent but interesting remarks: “… Can the Committee be “reasonably confident that inflation will move back to its 2 percent objective over the medium term”?

Fischer said, the chances the Fed will start hiking this year and the first move in September remains very well on the table if Friday’s job situation numbers don’t disappoint, whatever happens to the Chinese economy that is on its “slowing” path for years to come. The August job report (coming out on Sep 4) and the latest Survey of Economic Projections will be taken into consideration before reaching any decision. It’s the last look the central bank will get at the employment picture, arguably the most important component in its decision to raise rates, before it meets in the middle of September. Fisher warned for in a speech in July last year: “… I believe we are at risk of doing what the Fed has too often done: overstaying our welcome by staying too loose too long.

Fischer, the Fed’s No. 2 official, struck an optimistic tone on inflation over the weekend though, saying there is “good reason” to think it will move higher. We now risk falling into the trap of fighting the last war rather than the present challenge … should we overstay our welcome, we risk not only doing damage to the economy but also being viewed as politically pliant.” I think Mr. Fisher was and is still very right because, but that’s my personal opinion, if there is no obvious U.S. economic reason for delaying the first step to “normalization” in September, the Fed could become at increasing risk of getting trapped into some kind of a “QE black hole,” which is a very serious risk would that ever occur.

The attractiveness of these stocks as an investment option at this stage is confirmed by their Value Style Score of ‘A.’ Also, they carry a favorable Zacks Rank. Fischer expressed faith in the central bank’s ability to return inflation to its goal of 2 percent, which is generally associated with a healthy economy.

AmTrust Financial Services, Inc. (AFSI – Snapshot Report), based in New York, through its subsidiaries, underwrites and offers property and casualty insurance in the U.S. and across the globe. Chris Rupkey, chief financial economist at MUFG Union Bank, also thinks the central will act next month, saying “the only thing that could stop the Fed from moving at this late stage is a poor set of data out with the monthly employment situation report.” Morning MoneyBeat Daily Factoid: On this day in 1980, the communist government of Poland signed an accord with striking shipyard workers in the city of Gdansk. Staples and Office Depot will be in the spotlight Monday after saying late Friday they will delay the closing of their merger to provide the Federal Trade Commission with additional information.

Over the past year, hiring has been robust and the unemployment rate has dropped to 5.3 percent, leading officials to finally consider the momentous step of raising its benchmark rate. Markets Head Lower at End of Turbulent Month: Global stock markets headed lower at the end of a turbulent month that was dominated by concerns over China and the timing of the U.S. Government data released on Friday showed prices, excluding food and energy, rose just 1.2 percent compared to a year ago — well below the Fed’s goal. Hurricane Ignacio intensified as it blew across the Pacific on a route likely to bypass Hawaii on Saturday, said the Central Pacific Hurricane Center of the National Weather Service. With winds gusting up to 115 miles per hour, the hurricane centered 835 miles southeast of Honolulu and 625 miles south east of Hilo was moving northwest at 8 miles per hour, said center spokesman Neil Honda. “It just became a hurricane from a tropical storm,” Honda said, noting the weather became fierce enough to be classified a hurricane at 5 a.m.

Rocky Markets Could Be Good for These Stocks: Exchanges and market makers are getting a fresh look from portfolio managers seeking out investments likely to benefit from the large market swings. Some Stock-Market Experts Still Bracing For More Trouble: The big question worrying investors now is whether last week’s rally is sustainable or just the prelude to another storm. EU Ministers Push for Action on Migration Crisis: Germany, France and the U.K. pushed for a faster European response in dealing with the continent’s spiraling migration crisis as Hungarian police detained a fifth person in connection with the deaths of 71 migrants found in an abandoned truck in Austria last week. Meet the Private Watchdogs Who Police Financial Institutions: The use of outside monitors to police financial institutions that have misbehaved has exploded in recent years, sometimes generating friction.

PHILADELPHIA — Thousands of bicyclists in various stages of undress have pedaled their way around the city to promote fuel conservation and positive body image. Volkswagen Is Told to Shed Suzuki Stake: An international court has ordered Volkswagen to sell its nearly 20% stake in Suzuki Motor Corp., allowing the Japanese auto maker to extricate itself from the tie-up after a four-year struggle.

Eni Reports Huge Natural-Gas Discovery off Egyptian Coast: Eni said that it made a massive natural-gas discovery off the coast of Egypt, in what the Italian oil-and-gas company is calling the largest-ever find in the Mediterranean Sea.

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