Federal Reserve statement expected - 16.3.2016

US stocks closed lower on Tuesday as investors awaited Federal Reserve’s decision and oil prices fell. The dollar was little changed as treasury yields recovered after falling following weak retail sales data. According to live dollar index data the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, was flat at 96.670. Retail sales declined 0.1% in February, but more importantly the initial reading of January was revised downward from a growth of 0.2% to a 0.4% decline. Weak retail sales indicate no growth in consumer spending, which is a major driver of US economic growth. US producer prices fell 0.2% in February in line with expectations, the fifth decline in seven months. But manufacturing activity expanded in New York area after contraction of seven months in a row, while business inventories rose slightly. The Federal Reserve will release its policy decision at the conclusion of its two day meeting today. The Fed is expected to leave the monetary policy unchanged, and investors are anxious to see what is policy makers’ assessment of US economy outlook and their projections for rate hikes.

The S&P 500 closed 0.2% lower at 2015.93, led by 1.6% drop in energy sector. Consumer staples, utilities, telecommunications services and technology were the only sectors to finish in positive territory. The Dow Jones Industrial Average rose 0.1% settling at 17251.53, buoyed by 2% gain in Apple after Morgan Stanley said demand for the iPhone for the first quarter of 2016 exceeded analysts’ expectations. Trading was light with 6.3 billion shares changing hands in US exchanges, about 20% below the 20-day average. Today at 12:00 CET Mortgage Applications will be released in US. At 13:30 CET February Housing Starts and Building Permits will be published. At 13:30 CET February Consumer Price Index will be released. The headline inflation is expected to fall. At 15:15 CET February Industrial Production and Capacity Utilization will be released. The tentative outlook is negative. And at 19:00 CET Federal Open Market Committee Rate Decision will be released. Fed Chair Yellen will hold press conference at 19:30 CET.

European stocks fell on Tuesday as commodity shares retreated following oil decline. The euro was little changed against the dollar at $1.1105. The Stoxx Europe 600 index fell 1.1%. Miners were the worst performers: Anglo American sank 11% and BHP Billiton tumbled 6.5%. Tullow Oil slumped 11% and Statoil lost 2%. Germany’s DAX 30 closed down 0.6% at 9933.85. Volkswagen lost 2.3% on news the auto maker now faces a lawsuit filed in Germany seeking 3.3 billion euros related to the company’s emissions cheating scandal. France’s CAC 40 lost 0.8% and UK’s FTSE 100 closed lower 0.6%. Today at 10:30 CET labor market data will be released in UK. The February unemployment rate is expected to remain unchanged at 5.1% while average weekly earnings over a three month period ending in February are expected to rise year-on-year to 2.1% from 2.0%.

Nikkei closed 0.8% lower today as investors refrained from making big bets ahead of Fed’s decision. Banking stocks were the worst performers after Bank of Japan Governor Kuroda said it was theoretically possible to cut interest rates to around minus 0.5%. Chinese shares were advancing with Shanghai Composite Index up 0.2%.

Oil futures prices are rising on lower than expected rise in US crude stockpiles: American Petroleum Institute report late Tuesday forecast US crude inventories rose 1.5 million barrels last week, less than half of analysts’ estimates. April WTI crude fell 2.3% to $37.18 a barrel on the New York Mercantile Exchange on Tuesday, lowest settlement since March 4. Today at 15:30 CET US Crude Oil Inventories will be released by Energy Information Administration.