US equities were stopped in their tracks as markets began pricing in a higher likely hood of a FED rate increase in June after several key members started touting that a rate hike is warranted given the recent data out of the US, where we saw the CPI m/m, Industrial production m/m and housing starts outstripped expectations coming in better than expected. The odds of a June hike tripled from just 4% on Monday to 14% on Tuesday sending the USD soaring and equities tumbling. The DJIA lost 1.02%, the S&P 500 lost 0.94% and the NASDAQ-100 shed 1.32% as the new info was priced in.
Overnight saw the Asian session follow Wall Street’s lead with the Nikkei 225 shaking off positive GDP figures to close the session at -0.2%. The ASX 200 lost -0.7% as we saw the commodity sector dip on the pricing in of a higher USD and worse than expected Wage Cost figures ( 0.4% vs 0.5%), while the Shanghai Composite shed 1.8% despite better than expected New Home prices as credit concerns in the area continue.
Oil price remained higher overnight following a drawdown in API crude Inventories (-1100K vs previous of 3400K) and remained bid above 49 USD p/bl. Today’s Crude Oil Inventories are expected at -3.1m vs a previous of -3.4M, a continued worsening of the draw-downs would be the catalyst for the commodity to break the 50 mark.
Today sees very important data out of the world’s economies and perhaps the most anticipated for the day will be the FOMC minutes due today, in which markets will be looking for clues regarding the future of interest rate hikes and whether the FED considers June a good time for their next hike thus not only confirming yesterday increased odds but adding gas to the fire. Until then the odds of rate hike will be adjusted as per new data and comments which are released.
Other key events today, which are expected to spark volatility in their respective currencies and economies are as follows:
- Average Earnings Index 3m/y expected at 1.7%
- Claimant Count Change expected at 4.0K
- Unemployment Rate expected at 5.1%
- Foreign Securities Purchases expected at 10.35B
- Employment Change expected at 12.1K
- Unemployment Rate expected at 5.8%