“The Dutch Election…”

US

Indications that the US economy is steadily growing and a buoyant stock market is likely to lead to the Federal Reserve to announce an interest-rate increase this week. Moreover, besides the expected increase in the Fed’s benchmarket rate to a range from 0.75 percent to 1 percent, investors will be looking for the forecasts for 2017 and the years beyond.
The FOMC will probably continue to acknowledge the ongoing improvements in the US economy in view of the better than expected economic data including the Labour’s department report on the job market which showed that 235,000 workers were added in the payrolls in February and that the unemployment rate declined to 4.7 percent. The report also showed large increases in the headcount in construction and manufacturing sectors.

Dutch Election

One of the EU six founding members is facing the election on Wednesday which should set the barometer for the votes in the French and German elections which should happen this year. About 12.9 million people in the Netherland are eligible to cast their ballots. In total there are 28 parties contesting the election. Due to concerns over hacking the ballots shall be counted manually. Early data showed that the turnout at 10:30am Amesterdam time was 2 percent higher than the 2012 election, that is 15%. The Dutch benchmark AEX Index was up 0.3 percent on Wednesday morning while the dutch 10-year bond yield were down 2 basis points to 0.683 percent. A diplomatic dispute between the Netherlands and Turkey in the last week of the campaign pushed the election in the spot light with the Turkish president Recep Tayyip Erdogan accusing the Dutch of Nazi like behavior. Three polls late on Tuesday show that Liberal Prime Minister Mark Rutte extending his lead while support for anti-Islam challenger Geert Wilders fading. Other surveys showed that around two-thirds of the electorate remained undecided on the eve of the polling. With the main domestic campaign issues surrounding around immigration, integration, health and social care international attention focused on and if Wilders will rank first.
On Wednesday, the Liberal Party of Mark Rutte had 33 seats, while the Freedom Party of Geert Wilders gained 20 seats in the 150 seat parliament with more than 90 percent of the votes counted. The outcome was worse than that expected by the majority of opinion polls. This outcome represents a rejection of pulling the Netherlands out of the European Union, abandoning the euro, closing Dutch borders and stopping all immigration by Muslims. The Dutch benchmark AEX index rose as much as 0.6%.

Oil

Oil rebounded to $48 a barrel due to a decline in US crude stockpiles. As reported by the American Petroleum Institute, US inventories fell by 531,000 barrels last week. According to the International Energy Agency, oil markets are still struggling from a surge in supply from OPEC at the end of last year.

Oil last week hit the $50 a barrel for the first time since December. An OPEC report shows that Saudi Arabia’s production increased above 10 million barrels a day in February, with output still remaining below a ceiling set under the six-month cut deal.

West Texas Intermediate for April delivery rose to $48.87 a barrel on the New York Mercantile Exchange and at $48.53 in London. Total volume traded was about 10 percent above the 100-day average. Prices fell to the lowest close since December to $47.72 on Tuesday. Oil stockpiles across developed nations increased in January, after OPEC nations raised production relentlessly whilst they finalized an agreement to cut output.

UK

The Bank of England kept the benchmark interest rate at a record low 0.25 percent in an 8-1 vote. The vote split was the first since July. In an unanimous decision the bond-purchase program has also remained unchanged. After this decision the pound was up 0.4 percent to $1.2344 erasing its decline as of 12:16pm London time. Although the UK is growing solidly, Brexit is overshadowing this outlook.

US – The Fed

The signals of the Federal Reserve raising interest rates has actually materialized with the Fed raising its benchmark lending rate by 25 basis points and projected another two increases this year. US equities extended the gains as Fed Chair Janet Yellen said in a conference that the simple message is that the economy is doing well.

Japan – Bank of Japan

Hours after the Fed’s decision, the BOJ left its monetary easing program unchanged. With the economy slowly improving and bond yields under control, the Bank of Japan is in a position to hold steady for now.

China – People’s Bank of China

The People’s bank of China has increased the rates it charges in open-market operations and on its medium-term lending facility. The central bank said that with the economy steady, inflation rising and real lending costs going down, financial institutions have strong incentives to expand credit and housing prices have increased in some cities. In a Q&A statement, the PBOC said that higher open-market operation interest rates are mainly decided by the market. More flexible interest rates can help deleveraging and prevent bubbles and risks.

Market Movers:

Stocks – The MSCI Asia Pacific Index rallied 1.4% to the highest level since June 2015, while benchmark indexes in Indonesia, Taiwan and Singapore rose at least 0.7 percent; Japan’s topix increased 0.1 percent gaining for the first time in three days, the benchmark index was down 0.1 percent before the BOJ decision; Hong Kong’s Hang Seng gained 1.5 percent.
Yields – The yield on the 10 year Treasury notes held at 2.49 percent after falling 11 basis points on Wednesday while the Japanese 10 year yields dropped three basis points.
Commodities – Gold and Oil extended the gains. WTI crude oil extended its gain rising to $49.15 a barrel (increasing 0.6 percent) its first increase in eight days. Gold similarly added 0.6 percent to $1226.59 an ounce

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