July 11th, 2014 19:27:03 GMT

Earthquake reported offshore from Japan, near Fukushima

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Early-warning system triggered.

The USGS estimates earthquake a 6.8 magnitude 165km east of Honshu, Japan. The disasterous Fukushima quake was a 9.0 magnitude. A 6.8 would be a total disaster in most places but Japan is built to withstand earthquakes.

 

Japan earthquake July 11 2014

\ Japan earthquake epicenter

You can see the powerplant shake in a video here.

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July 11th, 2014 19:15:54 GMT

Fed’s Lockhart: Weak wage growth a sign of slack and tame inflation

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Lockhart’s speech is mostly a rehash of his earlier comments to Bloomberg TV:

  • Hiring trends positive but large amount of part-time work means Fed employment target rate not in sight
  • Little systemic risk from bullish markets and low volatility
  • No guarantee recent uptick in inflation is sustainable or means economy is close to Fed’s target
  • Rate hike likely in H2 2015

The full text of the speech is on the Atlanta Fed’s website.

I don’t believe the recent broad-based uptick of inflation measures necessarily portends that inflation is going to get out of hand. Inflation expectations remain well-anchored. There is no sign that price makers, or the general public, anticipate a break with the experience of price stability the country has enjoyed for more than two decades.

I am still prepared to believe that the first-quarter contraction was an anomaly attributable substantially to weather, an inventory adjustment, health care spending, and exports. However, if there were temporary or unusual factors at work depressing the first quarter, then it is reasonable to expect that the lifting of those factors provided a bump in the numbers in the second quarter that may also have been transitory.

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July 11th, 2014 18:04:16 GMT

Fed’s Lockhart says it’s too early to make a call on interest rates

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Atlanta Fed President Lockhart is speaking live on Bloomberg TV:

  • Welcomes the trend on the economy
  • If we look at the past few years, inflation has been too low
  • I want to see the economy to stand the test of time
  • I will tolerate some overshoot in inflation, beyond 2.5% one should be concerned and take action
  • Recent numbers may have some transient factors in them boosting inflation
  • Conditions will be right in H2 2015 for raising rates
  • The benefits of waiting to hike outweigh the potential costs
  • 5.25% is near full employment but must look at other numbers
  • I emphasize part-time for economic reasons, which was poor in recent report

Lockhart is closer to the core than Bullard or Plosser and I’d expect his comments reflect what Yellen and Dudley are thinking. Fischer and the new governors could, however, swing the balance toward the hawks.

It will be very interesting what Yellen has to say on Wednesday but it might sound a lot like what Lockhart said.

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July 11th, 2014 18:00:40 GMT

US June monthly budget statement +$70.5B vs +$79B expected

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  • In June 2013, the US government reported a $116.5B surplus
  • Outlays $253B vs $170B in June 2013
  • Receipts $324B vs $287B in June 2013

It’s tough to compare months, even to previous years, because the way the calendar falls each month.

US deficit with 4-month moving avg

US deficit with 4-month moving avg

The Mar-June period is the first time the US government has posted a surplus over any 4 month period since 2007.

The White House will also cut its 2014 deficit projection to $583B from $649, according to Bloomberg.

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July 11th, 2014 17:32:08 GMT

Vote: Who do you think will win the World Cup?

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We’re testing a new feature on our site where you can click on a poll and immediately show the results. Help us test it out by voting if it will it be Messi’s Argentina or Merkel’s Germany?

Vote: Who will win the World Cup?
Argentina
Germany

Fun fact: This is the first time two countries with a woman as the highest ranking politician have met in the World Cup final.

11 Comments

July 11th, 2014 16:59:48 GMT

Bond dealers see Fed hiking cycle topping at 3.50%

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A survey of the Fed’s 22 primary bond dealers from the NY Fed sees rate hikes beginning in Q3 2015 and reaching a high of 3.50% in 2017.

That’s down from a peak of 4.00% in the January survey but it still sounds wildly optimistic. The Fed, and evidently large parts of Wall Street, still see economy able to sustain those kinds of rates. I look at an economy that can barely get on its feet years after a crisis with the benefits of zero rates and near-endless QE.

If you start hiking rates you’re taking away two of the only tail winds the economy has — rising home and equity markets. Is the consumer going to carry the weight? Perhaps the oil boom will add to GDP but I don’t see how it could sustain Fed funds at 3.50%. I’d say rates at 1.00% in 2017 are much more likely.

1 Comment

July 11th, 2014 16:23:21 GMT

Australian dollar sags before the weekend – orders

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The Australian dollar has faded from the magnetic pull of 0.9400 a bit today, down to 0.9380 as the commodity complex fades on disappoint European stocks.

The first bids sit around 0.9361 which was yesterday’s low. Better bids near 0.9350 followed by the 55-dma at 0.9342.

Offers at today’s high at 0.9409 then not much until Thursday’s spike up to 0.9459 and 0.9480. Tough to imaging we get outside those ranges today.

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