RECAP: for the week ending March 17th

The biggest news of the week was the federal reserve’s decision to raise interest rates. As was widely expected, the Federal Open Market Committee (FOMC) raised the federal funds target by a quarter point (0.25%) to a range from 0.75% to 1.00%. The central bank hiked rates for the first time this year, the second time in three months, and only the third time since the 2008–2009 global financial crisis. After announcing the quarter-point hike, Fed chair Janet Yellen said the Fed intended to take a go-slow approach to further interest rate hikes. unemployment dipped to 4.7% in February and inflation was rising near the stated 2% target. President Donald Trump also released details of his proposed budget this week, indicating large increases in defense and security spending with cuts to various departments including the state department and the EPA, as well as eliminating funding to various ‘non-defense’ programs.

In Europe the Dutch elections and another legal step towards the UK exiting the European Union helped the pan-European benchmark Stoxx 600, the blue chip FTSE 100, and other major indexes ended higher. Equity markets soared after the center-right People’s Party for Freedom and Democracy (VVD), led by the current prime minister, was on a solid track to win the largest shares of seats in the Dutch general election.

In Asia Japanese stocks posted modest losses for the week. The widely watched Nikkei 225 Stock Average dipped 0.42% (83 points) and closed at 19.521.59 while the yen strengthened for the week, closing at ¥113.1, about 3.2% stronger than 2016 year end. Economic data pointed to solid growth in China in the first two months of 2017, reflecting the impact of stimulus measures as the government strives to maintain stability before a key leadership transition this fall.
Economic data pointed to solid growth in China in the first two months of 2017, reflecting the impact of stimulus measures as the government strives to maintain stability before a key leadership transition this fall. These economic indicators appeared to give China’s central bank enough confidence to raise domestic interbank lending rates a day after the Fed increased U.S. short-term interest rates. The PBOC stated this was not a refelction in a change in monetary policy, but the consensus is that this is an attempt to tighten the Chinese financial system as China pushes to manage financial risk in the wake of the upcoming Communist Party Congress.