HALISTER1: Fed Dots at Risk of Revision to Faster Pace of Tightening: UBS

Fed Dots at Risk of Revision to Faster Pace of Tightening: UBS

(Bloomberg) -- Current distribution of FOMC’s median dots suggests risk of an “implied faster pace of tightening across the entire forecasting horizon,” UBS economists Drew Matus, Samuel Coffin and Dave Liang write in note.
  • Only two policy makers would need to move their 2017-2019 outlooks higher to produce a higher median
  • Long-run forecast could move if just one forecast shifts between a 2.75%-3% rate
  • NOTE: Few dots could move higher, Matus said separately in Bloomberg Television interview Tuesday
  • Upward revisions to growth and/or inflation outlooks may signal FOMC members’ views about impact of any fiscal stimulus
  • A decision to describe near-term risks as “balanced” in statement could suggest next rate hike is “some time off in the future” rather than imminent
  • Statement should note rise in inflation expectations and greater optimism about labor market, while sticking with “gradual” approach to future moves
  • Expect fed funds and discount rates to rise by 25bps each, to 0.5%-0.75% and 1.25%, respectively
  • Yellen won’t stray from FOMC statement during her press conference
  • While 2017 will see shift to more dovish voting members, FOMC will follow through with two hikes, with risk of more
    • Number of appointments to Fed board should be made, including Yellen’s likely successor, who will probably be more hawkish; “that would likely make the FOMC as a whole more hawkish”
    • NOTE: Matus tells Bloomberg TV he sees “zero chance” of Yellen remaining as Fed chair
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Drew Matus (UBS Asset Management Japan Ltd)
Samuel Coffin (UBS Global Asset Management Japan Ltd)
David Liang (UBS Securities LLC)

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UUID: 7947283

HALISTER: Vivendi Lifts Stake in Italy’s Mediaset to 12.3%

Vivendi Lifts Stake in Italy’s Mediaset to 12.3%

(Bloomberg) -- Vivendi on Tuesday crossed 5%, 10% thresholds of Mediaset share capital, Paris-based co. says in statement.
  • Vivendi owns 12.32% Mediaset stake as of Tuesday
    • Vivendi said Monday it owned 3.01% of Mediaset capital
NOTE:
  • Earlier, Vivendi Said to Use Derivatives to Build Stake in Mediaset
  • Earlier, Mediaset Surges as Berlusconi Said to Counter Vivendi Push.
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
VIV FP (Vivendi SA)
MS IM (Mediaset SpA)

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UUID: 7947283

HALISTER1: RESEARCH ROUNDUP: Fed Seen Turning Cautious After Rate Hike

RESEARCH ROUNDUP: Fed Seen Turning Cautious After Rate Hike

(Bloomberg) -- (Adds Citi, Deutsche, Standard Chartered to item published Dec. 9.)
  • FOMC is unlikely to alter its forecast for two rate hikes in 2017 in Wednesday’s decision and probably won’t adjust longer-term dots by much as it’s too soon to judge economic impact of Trump administration policies, based on published research from economists and strategists.
  • Dec. 14 rate hike is regarded as a virtual certainty; market-implied probabilities stand at 100%; fed funds futures fully pricing one rate hike this month; all 78 Bloomberg-surveyed economists expect a 25bp increase
  • BNP, JPMorgan, Morgan Stanley are among those expecting Fed to keep 2017-2018 dots the same or little changed
  • Rising expectations for growth and inflation, as well as tightening U.S. labor market, should give data-dependent Fed confidence to hike for first time this year; cautious Fed seen by some as looking to avoid rattling markets, wait for details on Trump’s plans
  • See also: Research Roundup: U.S. jobs data opens way for Fed
  • BNP (U.S. economics team)
    • Fed to hike fed funds rate by 25bps; expect little guidance beyond what’s already in Fed’s projections
    • Statement could include upgraded assessments in first paragraph, description of risks as appearing “balanced”
    • No changes seen to Fed’s median dots; too early for big changes to summary of economic projections; most on FOMC will probably wait for more clarity
    • “Elephant” at Yellen’s press conference is question of how Fed will respond to changes in fiscal outlook; impact remains “highly uncertain”
    • MORE
  • BofAML (Candace Browning, others)
    • Market’s expectation for Fed hikes in coming years has room to rise
    • Inflation “party” has started, with core PCE expected to rise to 1.9% by end of 2017, “approaching if not overshooting the Fed’s 2% inflation target”
    • Economist Michelle Meyer expects Fed to hike once in 2017, three times in 2018; any signs of concern from Fed regarding USD strength would limit short-term USD gains
    • MORE
  • Citi (Dana Peterson, Andrew Hollenhorst, others)
    • Fed may make few, if any, adjustments to its growth and inflation forecasts
    • Renewed USD strength and back-up in yields may ultimately exert drag on U.S. growth and inflation
    • Recent moves in interest rate, currency markets aren’t likely to be enough to affect Fed’s 2017 forecasts now
  • Credit Suisse (Praveen Korapaty, others)
    • Market isn’t pricing in enough risk of Fed hikes in 2017-2018; Trump administration is likely to have passed some fiscal initiatives by 2H 2017-1H 2018
    • In phone interview, Korapaty said “we will probably get a small move up in dots;” Fed’s Dec. 13-14 meeting could be a “catalyst” for markets to start repricing number of hikes expected in 2017-2018, if statement or Yellen’s press conference is more hawkish than expected
    • MORE
  • Deutsche (Joseph LaVorgna, others)
    • Policy makers will have little reason to lower their long-run rate forecasts further, especially since upside risks to growth have increased considerably; they will likely view their longer-run fed funds projections as “just right”
    • Fed will likely be “encouraged” by convergence of markets’ outlook toward its forecasts
  • JPM (Michael Feroli)
    • Statement will take no view on prospects for fiscal policy; Yellen to stress that it’s premature to change economic or Fed policy outlook
    • No dissents expected in decision to hike
    • Median dot for 2017 will continue to suggest two hikes; JPM sees no compelling reason for major changes to 2018 or 2019 dots; FOMC may take “breather” on adjusting long-term dot
    • MORE
  • Morgan Stanley (Ellen Zentner, Ted Wieseman, others)
    • Trump’s economic agenda suggests Fed’s forecasts for growth and policy “look achievable,” which should lead to hikes next year in September and December; three more seen in 2018
    • Fed will stick to its path for target rate for now; expect slight downward revision to NAIRU and longer-run neutral rate
    • Market possibly pricing in a “decent probability” that median dots shift higher at FOMC meeting, though current market expectations are along FOMC’s projections
    • MORE
  • Standard Chartered (Thomas Costerg)
    • FOMC will want to avoid any unnecessary volatility and “meddling in politics” so its economic forecasts will be little changed
    • Changing its forecasts “radically” up or down would probably be seen as politically validating or rejecting Trump’s policy platform
    • “Status quo could be a relatively safe option”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Andrew Hollenhorst (Citigroup Inc)
Candace Browning (Bank of America Corp)
Dana Peterson (Citigroup Inc)
Ellen Zentner (Morgan Stanley)
Joseph Lavorgna (Deutsche Bank AG)

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UUID: 7947283