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Worry-Warts Agenda For The FOMC

"Can Fed policy ever be local again?" asks Bloomberg's Richard Breslow ahead of this week's meeting, as there are plenty of things to focus on if you want to be worried about the world...

Plenty of things to focus on if you want to be worried about the world:

  • From Peru lowering f/casts,
  • wishy-washy Mexico retail sales,
  • to horrible BZ consumer confidence (worst in the history of the time series),
  • weak China industrial profits,
  • escalating Ukraine violence,
  • Russia downgrade to junk,
  • electricity cuts in South Africa causing mayhem,
  • shelling in the Golan Heights;
  • of course Greek bonds getting hammered,
  • election outcome is viewed as credit negative both by S&P and Moody’s.

Going into FOMC and as markets wonder whether they will be more or less dovish, none of this is lost on them, would be very surprised if they went out on a limb and did anything other than stay the course with a dovish twist, they will be circumspect

Looking at U.S. bond market, it has been trading in a very small range and just a fraction higher, this seems to me to be  not a good sign, would have expected it to have been a bit more bid with all the noise in other markets -- worth keeping an eye on if bonds cease to be the obvious safe haven trade. They have been droopy before, but just saying...

Draghi comments to EU finmins, noting that without immediate structural reform, QE will have no lasting effect, which is both true and unlikely to prompt action, would be a pleasant and unlikely surprise if finmins do take his warning to heart

At the same time, banks are called upon to raise more capital, this is of course part of a prudent policy, but also to deal with difficult times, no diminution of pressure to raise capital despite banks’ protests

Bizarre headline from Turkey’s Erdogan, who sees superior intelligence working against his country; no independence at the central bank -- with Gov. Basci signaling an emergency meeting next week (Feb. 4) to review rates should inflation fall 1ppt in Jan -- not a good way to attract capital to country

In any event, the noise factor is extraordinary, which is likely making people very wary of committing as much as they’d like to this early in the year

Source: Bloomberg Trader's Notes