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Daily Agenda: Investors Wait for FOMC Notes

HSBC’s Geneva office raided by investigators; Toll Holdings to merge with Japan Post; fighting escalates in eastern Ukraine.

Notes from the January 27–28 Federal Open Market Committee meeting will be released this afternoon. Investors are keenly interested in discovering more details regarding the decision to add “international developments” to the list of factors that will determine timing of an initial rate hike. With much of the world plodding through a combination of near deflation and soft activity, any concerns at the Federal Reserve about problems abroad could possibly delay action, despite strong improvement in domestic labor markets. For bond markets, the impact of any shift in language could be significant. In a note to investors yesterday David Rosenberg, chief economist at Gluskin Sheff in Toronto, argued, “I can only reiterate the old refrain that a market that does not respond bullishly to bullish news is not a bull market.“ He added, “Then again, a sub–2 percent yield on the ten-year U.S. Treasury note, it’s safe to say, had a whole lot of deflationary news already being discounted.”

HSBC Geneva office searched by officials. Investigators working for the Geneva public prosecutor’s office visited HSBC’s primary Swiss office today to conduct a search as part of an ongoing probe over alleged money laundering. Swiss and U.S. authorities have been examining past practices at the bank for years since a whistle-blower employee secured the names of thousands of clients who had allegedly used accounts with the private banking service to avoid taxation at home.

Australian company pushes for merger. The board of directors of Toll Holdings, Australia’s largest supply chain company, recommended today that shareholders accept a $5 billion takeover by Japan Post. The proposed merger, which came as a surprise to Toll’s management, would create one of the largest global logistics firms and represent a nearly 50 percent premium to shareholders from Toll’s share price prior to the announcement.

Difference of opinion at the Bank of England. Notes from the Bank of England’s Monetary Policy Committee meeting earlier this month released today reveal discord among the bank’s policymakers. While two members argued that the long-term inflation outlook made a rate hike within 2015 likely, another member suggested that a further rate cut was possible in the face of deflationary pressure. In public statements, Bank governor Mark Carney has kept a balance between expectations for negative inflation in the near term and the possibility of rising rates in the foreseeable future.

Fighting in Ukraine escalates. Ukrainian troops retreated from the key town of Debaltseve today after heavy fighting with Russian-backed separatists. During a trip to Hungary yesterday, Russian President Vladimir Putin called on Ukrainian leadership to allow military forces to surrender to rebels.

Greece to seek temporary aid. Media outlets report representatives of Athens in Brussels are pushing for a temporary bridge loan to ensure that government operations continue as negotiations drag on. In comments yesterday, German Finance minister Wolfgang Schäuble continued to argue against making significant changes to the original loan terms.

Coffee hits one-year low. ICE Arabica Coffee futures contracts for May delivery fell to $1.5885 in trading on Tuesday, the lowest level since February 2014. Selling pressure was spurred in part by improving weather conditions in Brazil that alleviates some concerns over the current harvest cycle there because of an earlier dry spell. Despite the sharp sell-off, analysts continue to forecast long-term increased global demand as consumption in key developing economies continues to rise.

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