The last week has seen a number of shops moving forward their forecasts for the timing of Fed rate hikes, and suggesting the FOMC will set the stage for tighter policy by removing the rates at zero for a "considerable time" language from its policy statement tomorrow.
Not so fast, says the WSJ's Jon Hilsenrath in a video chat. The "considerable time" pledge will, in fact, remain.
The news is enough the send a previously flatlining S&P 500 (NYSEARCA:SPY) to a 0.65% gain. The Nasdaq 100 (QQQ +0.5%) and DJIA (DIA +0.5%) rise alongside.
Forty-eight percent of fund managers believe the Fed will begin rate hikes in Q2, according to the BAML Fund Manager Survey for September. That's up from 38% one month previous. The ECB is a different story - with 42% expecting QE before year's end vs. only 32% believing so in August.
Naturally in this scenario, the group overwhelmingly - 86% - expects the dollar (NYSEARCA:UUP) to strengthen, not just against the euro (NYSEARCA:FXE), but the yen (NYSEARCA:FXY) as well, given the BOJ's threat to ease more.
The Scottish referendum, meanwhile, has managers skittish, with the U.K. (NYSEARCA:EWU) being the region most want to underweight in the coming 12 months.
Condensate exports from the U.S. are continuing for the third straight month, following the easing of a 40-year crude export ban in June.
As U.S. condensate supply continues to surge due to the shale boom, oil producers are looking to export a growing surplus, while consumers, such as refiners, have lobbied to keep exports forbidden to ensure lower energy costs in the U.S.
Washington has still held back on issuing more permits to export the minimally refined oil, despite growing international pressure to soften the ban,
It's taken less than two weeks in September to erase all of the summer's big gains in long-term Treasury prices. Today's five basis point jump in the 10-year yield to 2.60% brings it above the level it was at just after the Memorial Day weekend.
If Europe led yields south during the summer, it's leading them north now, with the German 10-year Bund yield up another five basis points to 1.05% after sinking to below 0.9% two weeks ago. Italian, Spanish, and British yields are sharply higher as well (though all three countries sport 10-year rates lower than the U.S.).
The first Fed rate hike will occur in June of next year, not September as earlier forecast, says the team at Bank of America. Over the 18 months following, BofA sees rate hikes at every other Fed meeting and a peak Fed Funds rate of 4%.
Why the changed forecast? Growth and inflation data have been stronger than the bank expected, and booming asset markets alongside falling long-term bond yields have triggered a "re-engagement of the banking system."
Also seen is a gradual change in rhetoric from Janet Yellen, and the bank expects an imminent change to the Fed's long-used phrase of rates at zero for a "considerable time."