19 June 2013 AMC
Market Summary
Market Internals
Leaders and Laggards
Technical Updates
Briefing's Commentaries
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Commodities
Treasuries
Next Day In View
- Japan reported an adjusted trade deficit of -JPY0.82 trillion (-JPY0.89 trillion expected, -JPY0.70 trillion prior)
- New Zealand reported a current account deficit of $0.66 billion (-$0.60 billion expected, -$3.23 billion prior).
- Australia's CB Leading Index rose 0.3% month-over-month (0.1% prior) while the MI Leading Index came in at 0.6% (0.1% previous).
- Markets in China and Hong Kong registered losses amid ongoing worries regarding the health of the liquidity-starved Chinese financial system. As a result, the short term repurchase rates have climbed to multi-month highs.
- Spain reported a trade deficit of -EUR1.60 billion (EUR0.30 billion expected, EUR0.60 billion prior).
- The Swiss ZEW Expectations Survey remained unchanged at 2.2 (10.0 forecast).
- The International Monetary Fund has released a report on Spain, cautioning the banking sector may be exposed to further loan losses as the economy continues to contract.
- Fed sees downside risks to the outlook for the economy and the labor market as having diminished
- Bernanke said Fed could reduce pace of purchases later this year until the middle of 2014 when it would end
Fed releases FOMC statement
(Full Statement)
Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Partly reflecting transitory influences, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.IN AEROSPACE/DEFENSE NEWS ...
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall. The Committee also anticipates that inflation over the medium term likely will run at or below its 2% objective.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was James Bullard, who believed that the Committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings, and Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.
EADS (EADSY) is considering options for defense business but has no plans to sell it, according to reports
Click Here for the Reuters.com Article
US Airways (LCC) and American Airlines (AAMRQ) deal should get reviewed, says lawmakers, according to reports
Click Here for the Reuters.com Article
Boeing (BA) Dreamliner from United (UAL) was diverted following possible oil filter problem, according to reports
Click Here for the Reuters.com Article
CIT Group (CIT) has placed an order for 30 BA 737 MAX airplanes.
Boeing (BA) and CIT Group (CIT) announced from the 2013 Paris Air Show that CIT Aerospace has placed an order for 30 737 MAX 8s. The order is comprised of 10 new incremental aircraft and conversions of 20 existing Next-Generation 737 orders.
Reuters.com Article
RTI International Metals (RTI) announced its wholly owned subsidiary RTI Claro, earlier this year entered into a long-term contract with Bombardier Aerospace (BDRBF) to supply precision machined components and assemblies for several Bombardier aircraft models. This agreement, which replaces a recently expired supply arrangement, runs through 2019 and calls for RTI to manufacture components and assemblies not previously provided by RTI.
Northrop Grumman (NOC) has delivered the first of four AQS-24A airborne mine-hunting vehicles to the Japanese Maritime Self-Defense Force for deployment on Japan's new MCH-101 helicopter platform.
Boeing (BA) and Ryanair finalized a firm order for 175 Next-Generation 737-800 airplanes valued at $15.6 bln at list prices. The order was originally announced as a commitment in March.
Boeing (BA) announced that first delivery of the 737 MAX 8 to launch customer Southwest Airlines will be a quarter earlier than originally scheduled -- in the third quarter of 2017 instead of fourth quarter.
International Lease Finance, a wholly owned subsidiary of American International (AIG) has selected Pratt & Whitney PurePower PW1100G-JM engines to power an additional 30 A320neo Family aircraft bringing ILFC's total commitment to 180 engines. Pratt & Whitney is a division of United Technologies (UTX).
Boeing (BA) and Oman Air announced an order for five Boeing Next-Generation 737-900ER airplanes. The order, previously unidentified on the Boeing Orders & Deliveries website, is valued at $473 mln at current list prices.
Pratt & Whitney, a unit of United Technologies (UTX), has successfully completed initial design review with the U.S. Air Force Research Laboratory on its Adaptive Engine Technology Development Program. Also, co will provide exclusive power for up to 100 Embraer (ERJ) E-Jets E2 aircraft based on the letter of intent announced by Embraer and International Lease Finance Corporation.
Pratt & Whitney (UTX) and Norwegian Air Shuttle signed a definitive agreement to power 50 firm EADS' (EADSY) Airbus A320neo family aircraft with PurePower PW1100G-JM engines. Also, International Lease Finance Corporation has selected Pratt & Whitney PurePower PW1100G-JM engines to power an additional 30 A320neo Family aircraft bringing ILFC's total commitment to 180 engines.
Boeing (BA) and Travel Service have announced a commitment for three 737 MAX 8s at the 2013 Paris Air Show, valued at $301.5 million at list prices
Northrop Grumman (NOC) announced the delivery of its Scalable Node Architecture Software Development Kit to second- and third-party defense product and services firms to foster broader use of open architecture throughout the co's defense program teaming efforts.
Pratt & Whitney, a United Technologies (UTX) co, recently reached a milestone in the National Aeronautics and Space Administration's Environmentally Responsible Aviation Project by demonstrating performance and efficiency of a Geared TurboFan ultra-high bypass system, successfully completing 275 hours of fan rig testing in the NASA Low Speed Wind Tunnel.
Bonds: Treasuries Hammered Post-FOMC
Treasuries were hammered to session lows following the release of today's FOMC Statement, and continued lower throughout Fed Chairman Ben Bernanke's accompanying press conference. Today's Statement met market expectations as the FOMC suggested it would continue buying a total of $85 bln per month in agency mortgage-backed securities and Treasury securities and that it is prepared to " increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes." However, during his accompanying press conference Chairman Bernanke suggested if conditions and trends continue the Fed could reduce its purchases later this year and through mid-2014 when the program could end. Heavy selling engulfed longer dated maturities with those seven years on up all ending lower by just more than one full point. The weakness weighed heaviest on the belly of the curve with the 5-yr surging 17.5 bps to 1.227%, marking its highest close since August 2011. Elsewhere, the benchmark 10-yr yield jumped nearly 13 bps to end the day at 2.311% to see its highest close since March 2012. The long bond outperformed as its losses ran the 30-yr yield up just 7.2 bps to 3.414%, but it too still settled at its highest since March 2012. Significant curve steepening developed on the sell-off as the 2-10-yr spread widened to 201 bps.
Treasuries were hammered to session lows following the release of today's FOMC Statement, and continued lower throughout Fed Chairman Ben Bernanke's accompanying press conference. Today's Statement met market expectations as the FOMC suggested it would continue buying a total of $85 bln per month in agency mortgage-backed securities and Treasury securities and that it is prepared to " increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes." However, during his accompanying press conference Chairman Bernanke suggested if conditions and trends continue the Fed could reduce its purchases later this year and through mid-2014 when the program could end. Heavy selling engulfed longer dated maturities with those seven years on up all ending lower by just more than one full point. The weakness weighed heaviest on the belly of the curve with the 5-yr surging 17.5 bps to 1.227%, marking its highest close since August 2011. Elsewhere, the benchmark 10-yr yield jumped nearly 13 bps to end the day at 2.311% to see its highest close since March 2012. The long bond outperformed as its losses ran the 30-yr yield up just 7.2 bps to 3.414%, but it too still settled at its highest since March 2012. Significant curve steepening developed on the sell-off as the 2-10-yr spread widened to 201 bps.
Jason's Commentaries
Like what my mentor said. Best to stay away from the market when its filled with divergence, idiots and Ben Bernanke. Last night was really a hell of a gyration where many people are being rinsed out by the market makers. One hour before the closing bell during Bernanke's conference, market washed out once again. All sectors reported losses last night, with utilities hit with the heaviest loss of 2.29%. It seems that the market is taking the news negatively. Luckily they have already priced in the losses on Monday and Tuesday, else their portfolio would have been really awful now. Volumes were at 760m shares traded on the NYSE, bulls were totally overrun by the bears. Treasuries took a hit after the FOMC statements as well. When asked about his future plans, Bernanke refused to talk about it after Obama's comments about 'firing' him on Monday. On the technical side, the indices were exhibiting somewhat like an engulfing pattern, breaking the 20MA. Besides the equity and Treasuries market, the metal market was also being affected heavily as well. Asia was in the sea of red as well. Seems that we're going to have some bearish open today.
Market Call: DOWN
Date: 20 June 2013
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