Another busy day awaits markets as the Federal Open Market Committee concludes its final monetary policy meeting of the decade.
Ahead of new Fed statements markets are often cautious but this morning, two hours before the open, risk is firmly on the table. The Dow looks to open 36 points higher at 10,434 and futures on the S&P 500 are up 5 points to 1,109. The return of risk is likely a reaction to the positive industrial production numbers yesterday as well as data from Europe showing the continent's service sector is at a two-year peak; alongside services, manufacturing has expanded for 10 straight months, fresh data showed today.
Meantime, the US dollar is weaker against an array of currencies, while WTI Crude oil is up 54 cents to $71.23 per barrel and Spot Gold is $9.30 higher at $1,134.50.
Key Events Today:
8:30 ― Inflation remains on the policy backburner for good reason. The Consumer Price Index showed core prices at +0.2% in October and analysts look for a +0.2% reading in November. Higher gasoline prices are expected to push the headline index up 0.4% in the month following a +0.3% read.
“Inflation is not a problem and we do not expect it to become one any time soon, but deflation risks have greatly diminished,” said analysts from IHS Global Insight.
8:30 ― For those in real estate the Housing Starts & Building Permits report is the key release this week. The number will be closely watched after October’s survey saw a 10.6% downturn in the month. Most analysts look for a sharp rebound. The annualized pace of sales is currently 529k; forecasters look for the pace to be 575k in November.
“The drop in October housing starts really underscored just how much the fragile housing recovery is relying on government support,” said Ellen Zentner from BTMU. “Our forecast calling for such a large jump in November is nothing more than the assumption that the rate of home building resumed its prior pace as soon as Congress announced on November 5th the extension, and expansion, of the homebuyer tax credit through April 30th next year.”
Forecasters from Nomura add: “If activity in the single-family sector deteriorates again it would be a worrying sign for the housing market outlook. Our forecast for starts, while above consensus [580k], is still below the level reached in September. We therefore see additional upside risks to our more optimistic call.”
2:15 ― The FOMC Meeting Announcement will, as always, get plenty of media attention this week, but forecasters appear unanimous is expecting no policy change. The Fed Funds rate will, of course, stay within the zero to 0.25% band, and modest improvements aside the bank’s language won’t be dramatically different.
Economists at Deutsche Bank expect the Fed to continue “to upgrade the economic assessment in the meeting statement—albeit moderately so. The language from the prior statement indicating: ‘Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up’ need not be changed. In terms of price pressures, we expect the Fed to again reuse the boilerplate inflation language: ‘With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.’”
Analysts from Nomura add: “The only part of the statement that may be revised, in our view, is the description of economic activity. In particular, non-auto consumer spending has been strong over the past few months and the statement still sounds downbeat about household spending.’”
