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School's Out: Financial Review

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

DOW – 140 = 17,750
SPX – 18 = 2063
NAS – 54 = 4763
10 Y – .07 = 1.80%
OIL – 1.13 = 43.65

Eurozone growth will be slower than previously expected with subdued inflation in 2016, the European Commission announced in its spring economic forecast, warning of high risks to the bloc’s economy. The GDP of the 19-nation area is now predicted to expand just 1.6% this year, less than the 1.7% growth of 2015, while consumer prices are seen up 0.2%, significantly below the 0.5% increase projected in February.

The Reserve Bank of Australia has cut its official cash rate by 25 basis points to a historic low of 1.75%, the first reduction since May 2015. The RBA noted that inflation was “unexpectedly low,” and it also gave a cautious outlook for the Australian economy. Following the rate cut, the yen surged against the Australian dollar, pushing the greenback below ¥106-yen for the first time in about 18 months.

Federal Reserve Bank of Atlanta President Dennis Lockhart says financial markets may be underestimating the odds of a rate increase in June. Lockhart calls it a real option. At the most recent FOMC meeting Federal Reserve officials signaled that they expect to raise interest rates twice this year, while investors see only one move. If economic theory is any guide, even the central bank’s more hawkish outlook would still leave the target for the benchmark policy rate way too low.

Meanwhile, San Francisco Fed President John Williams laid out a “pretty optimistic” outlook, with unemployment coming down, growth rebounding and inflation picking up, allowing the Fed to raise interest rates gradually. Williams said he doesn’t agree with negative scenarios for the economy and doesn’t take a “strong signal” from the 0.5% growth rate in the first quarter. He said GDP data were distorted by seasonal factors and growth was actually closer to 2% annual rate.

Seven of the world’s biggest banks have agreed to pay $324 million to settle a private U.S. lawsuit accusing them of rigging the ISDAfix, an interest rate benchmark used in the $553 trillion derivatives market; ISDA stands for the International Swaps and Derivatives Association.

The settlement resolves antitrust and other claims against Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, JPMorgan Chase and Royal Bank of Scotland. Several pension funds and municipalities accused the banks of engaging in a conspiracy to rig the “ISDAfix” benchmark from 2009 to 2012. Other bank defendants have yet to settle.

Nearly every school in Detroit was closed for the second straight day, once again causing more than 45,000 students to miss class because of a funding crisis that has put the city at odds with teachers. The Detroit Teachers Federation called for a mass sickout after the school district’s management announced over the weekend that it would not be able to pay teachers in the summer.

Union leaders met with district leadership on Monday but did not reach an agreement. Though...


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