Daily Agenda: Markets Await Federal Reserve Announcement

FOMC speculation dominates global markets; Altice announces agreement to buy Cablevision; U.K. retail sales weak in August.


On a day when global markets are focused on a rate announcement from the Federal Reserve, investors have yet to find a consensus on when policymakers at the U.S. central bank will begin raising rates let alone what the impact will be on financial-asset values. In China a nearly 2 percent gain for the Shanghai Composite was turned into a 2 percent loss in hectic trading during the last half hour of the session, while in Europe stocks largely went sideways. Meanwhile, with three days left before a national election, the mood in Greece appears mixed as the Syriza coalition fights for its life. With prospects for a return to power for the New Democracy group in the euro zone’s most troubled economy, debate over austerity there appears likely to reemerge in Brussels.

International cable merger. Cablevision Systems, based in Oyster Bay, Long Island, has agreed to be acquired by Netherlands-based Altice, a European telecommunications company, in a merger valued at $17.7 billion. The deal is the second recent acquisition providing Altice with access to U.S. markets.

GOP debate reveals more dissension. In a spirited three-hour discussion, leading candidates for the Republican presidential nomination squared off with rhetoric that at times took the form of attacks on one another. Real estate developer Donald Trump stole the spotlight once again, squabbling with fellow candidates in a showing that divided analysts over who gained or lost in the court of public opinion.

U.K. retail sales soften. At 3.7 percent year-over-year, August retail sales data for Britain registered weaker than consensus forecasts and significantly softer than July’s figures. The Office for National Statistics noted that online sales expanded during the month while grocers saw declining traffic.

Jobless claims decline in the U.S. but so do housing starts. U.S. economic data released on Thursday in advance of the FOMC rate announcement was mixed. A drop of 11 thousand in weekly initial jobless claims released by the Department of labor brought the measure to its lowest level in months. Meanwhile, new home construction contracted in August according to figures released by the Commerce Department with the annual rate of groundbreaking at 1.13 million.

Portfolio Perspective: Credit Boom Will Go On Regardless of Fed Tightening

We’re actually looking forward to higher rates. The history of modern credit booms has shown that when the Fed begins tightening from historically low rate levels there is usually some type of correction (which we may have had in August) around the time of the tightening, and then the best stock price returns of the credit boom follow because the credit boom intensifies after the tightening. That’s because the Meriwether-type credit funds that our nation’s pensions hire to shoot for 7.5 percent have to invest more aggressively to paper over the losses that higher yields generate. So, the credit boom is likely to persist no matter what the Fed does, and to intensify after the Fed begins to lift rates.

Brian Reynolds is the chief market strategist for New Albion Partners in New York.