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Daily Agenda: In Advance of FOMC Announcement, Markets Prepare for Normal

Home prices slide in China, Netanyahu reelected in Israel; Goldman Sachs floats BDC unit.

Market sentiment today hinges almost entirely on the Federal Open Market Committee’s announcement this afternoon. The anticipation of any change in wording to policy means investors are again ready to rethink what a new market reality may look like as the process of policy normalization begins. With expectations for tightening to begin in June now nearly consensus, the Fed’s statement today at 2 pm U.S. Eastern time will be carefully parsed for the slightest changes in guidance language.

Netanyahu wins in Israel. Incumbent Prime Minister Benjamin Netanyahu secured a victory in Israel’s general election despite earlier polls that had seen him trailing Isaac Herzog, his left-of-center opponent. He will now attempt to set up a governing coalition around his Likud party likely consisting of hard-right-wing and Orthodox parties.

Home prices sink in China. For the sixth consecutive month, February housing index data from China’s National Bureau of Statistics registered a year-over-year contraction. The decline was the biggest drop since the index was first calculated in 2011, with declines in 66 of the 70 cities covered. The accompanying release from the bureau predicted a rebound in March, however, as newly relaxed mortgage rules attract more buyers.

Unemployment in the U.K. flat. The U.K. unemployment for the three months leading to January was 5.7 percent, a disappointment after consensus forecasts called for a marginal contraction. Adding to the gloom, January wages were significantly softer than forecast at year-over-year growth of 1.8 percent, versus forecasts for readings of more than 2.

Protest at new ECB headquarters. Protesters against austerity measures set police cars on fire and clashed with security as the new headquarters of the European Central Bank was unveiled this morning in Frankfurt. The new facility, which was budgeted to cost $1.4 billion, did not suffer any damage as thousands of pro-Greece marchers took to the streets.

Herbalife investigation intensifies. At least one individual has been subpoenaed to appear before a federal grand jury as part of ongoing investigations by the FBI and the U.S. Attorney’s Office for Southern New York into trading of Herbalife, the multilevel-marketing company of nutritional supplements. A grand jury would mark the first step towards possible criminal charges over trading in the stock which has been a target for activist investors, including William Ackman, head of New York–based hedge fund firm Pershing Square Capital Management.

Japanese trade deficit contracts. In a blow for Abenomics, Japanese Prime Minister Shinzo Abe’s economic revitalization platform, February trade data saw a year-over-year decline of nearly 50 percent in deficit balance on lower fuels costs despite weaker-than-anticipated export demand. While shipments to the U.S. improved, a 17 percent year-over-year slide in China-bound exports weighed heavily on total activity.

Goldman floats BDC unit. In an initial public offering yesterday, Goldman Sachs Group placed $120 million for a specialty lending unit, Goldman Sachs BDC, which begins trading today under the symbol GSBD. The company, structured to take advantage of tax benefits afforded to business-development companies, was priced at $20, the low end of the initially targeted range of $20–21.

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