Briefing highlights
- Central bankers rock financial markets
- Potash, Agrium strike $38-billion merger
- Video: Use of social media in the office
Market turmoil
Global markets are in turmoil again, with the spotlight on the Federal Reserve’s “most noted” dove.
Investors are watching closely for what Fed governor Lael Brainard has to say later in the day after last week’s stock plunge, which was sparked by comments from another U.S. central bank governor.
Asian markets caught up with Friday’s troubles as Tokyo’s Nikkei sank 1.7 per cent, Hong Kong’s Hang Seng 2.9 per cent, and the Shanghai composite 1.9 per cent.
Stocks also slumped in Europe, with London’s FTSE 100, Germany’s DAX and the Paris CAC 40 down by between 1.1 and 1.3 per cent, though New York perked up.
Investors have the central bank jitters from policy issues at the European Central Bank and Bank of Japan to fears of a Sept. 21 interest rate hike from the Fed.
This is playing out across financial markets, from stocks to bonds to currencies.
“The bond market has been shuddering as speculation revives that a rate increase in the U.S. could still be on the table after all on Sept. 21 despite a disappointing August data round,” said observers at Société Générale.
Indeed, investors are speculating that Ms. Brainard’s afternoon speech to the Chicago Council on Global Affairs could point to just that, sort of a last-minute attempt to get the signal out before the policy-setting Federal Open Market Committee enters its so-called communications quiet period Tuesday in advance of the next meeting.
“Brainard’s speech today took on undue importance, as the timing of a speech by the Fed’s most noted dove, just ahead of the FOMC blackout period, is too much of a coincidence for some,” said Royal Bank of Canada senior currency strategist Elsa Lignos.
There’s more going on here, specifically that the ECB and BoJ have little more to throw at the fight.
Here’s what market observers have to say:
“It’s become clear that the influence that central banks had in the past is waning. No matter the jurisdiction, or the action taken by each respective bank, we continue to see limited impact on real economic variables and on markets that continue to march to their own tune. It’s no accident that we now have two out of the big four central banks (the ECB and BoJ) conducting ‘comprehensive policy reviews’ to gauge the effectiveness of current policies.” Bipan Rai, CIBC World Markets
“While global central banks are collectively the problem, and the cause may have been the ECB this time, ultimately the biggest worry is surrounding the Fed. The general sense is that Fed hawks have not stepped aside despite signs of a slowdown in the third quarter. Worsening U.S. economic data mixed with ongoing talk of a rate hike is the ‘anti-Goldilocks’ for markets.” Jasper Lawler, CMC Markets
“As the cost of ultra-easy monetary policy starts outweighing the benefits, markets are realizing and realigning to the reality that policy makers are reluctant to cut rates into even deeper negative territory and pursue even great balance sheet largesse.” Société Générale
“Investors have been reminded what volatility looks like, after sailing unperturbed through July and August. The blame has been pinned on the Fed’s Eric Rosengren, but he hardly said anything novel on Friday, warning as he did that rates would probably rise gradually. With so little on the calendar for today, the speech by Fed member Lael Brainard has acquired a greater degree of importance, with any departure from her previous dovish stance likely to occasion some degree of additional panic.” Chris Beauchamp, IG
“The seemingly sudden realization that central banks are going to think harder about doling out stimulus left, right and centre, is hitting global financial markets hard this morning ... At least North Korea managed to get through the weekend without conducting any nuclear tests, but there is speculation from the South that Pyongyang is ready for more.” Jennifer Lee, BMO Nesbitt Burns
“She [Ms. Brainard ] has tended to be a dove this year so I would expect the tone of her remarks to downplay any concern that the Fed is in a rush to raise rates. That might help calm markets if so, but a reversal in this stance would be a significant signal to markets as it would convey the impression that the doves are dwindling in numbers and that a hike next week is at risk.” Derek Holt, Bank of Nova Scotia
Potash, Agrium strike deal
Potash Corp. of Saskatchewan and Agrium Inc. are hailing a “transformational merger” that will see $500-million (U.S.) a year in savings within two years and a forceful expansion.
As The Globe and Mail’s Andrew Willis reports, the two agricultural giants unveiled a $38-billion deal that would see Potash shareholders own 52 per cent of the company.
“This is a transformational merger that creates benefits and growth opportunities that neither company could achieve alone,” Agrium’s Chuck Magro, who will be chief executive offer of the merged company, said in a statement announcing the deal.