Good Day and welcome to Tuesday morning. As it turns out, Chuck is under the weather and will be away from the action this week, although Friday remains as a possibility at this point. Having said that, its going to be the usual team effort that also consists of shortened content and absent the bells and whistles that you are generally accustomed to. Now that I have gone through my disclaimers, let’s start with Frank to get things going and then see what Dane Moody has in store for us today.

Salta – Did it snow where you are? Sounds like a beautiful view out across the city / county in St. Louis. Maybe a little tie up in traffic? It’s 85 and sunny here. Down here I’ve been thinking a lot about how governments can provide an environment where the economy thrives, or craters. I’ve written about Argentina before [https://goo.gl/kbmb7e]. Early in the 20th century, it was the envy of the world with natural resources and exports galore. From the 40’s onward and into our new century, successive crony governments ranging from the corrupt Peron and Kirchner regimes (and spousal derivatives) to corrupt military juntas have succeeded in driving prosperity down and inflation way up. The new President over the past 18 months or so seems to be making a difference. We’ll see how it turns out, but locals feel a real new opportunity. The next election is in 2-1/2 years, like the US on a 4-year cycle, it’ll be interesting to see if the masses agree when it’s time to go to the polls.

When we travel in the US, we generally focus on the great outdoors. The Grand Canyon, Half Dome, the Blue Ridge Mountains and so on. I don’t spend my time touring government building or churches unless there is really something extraordinary. So many friends laugh that in Europe it’s often the cathedral tour approach. There it’s traditional to see government edifices like castles and parliaments, churches (the other side of historical European government), and less frequently get out in the countryside. With the focus most of us have had on European history, it’s a good exercise to consider what institutions and policies led places like England and Germany to prosper more consistently, while the southern tier remains in a sort of chaos even today. What led Spain and Portugal to squander the lead they built up as early explorers and plunderers? Blue books open – go.

And so today when I open 30+ newspapers and journals from around the world on my computer, it’s a time to hold my breath and wonder what new pronouncement has appeared. What impact will it have? Is this going to work in 2017 and what about the 20-year view? Right now we see that people appear to be reading from completely different song sheets. Corporate earnings are down and EPS is down for many quarters in a row while the equity markets continue to surge. The bond market, as I mentioned yesterday, doesn’t appear to share the view of high growth or high inflation. Oil has spent the past week declining towards break-even in the newer US production zones. Various prices are markets appear to be trading on vastly different reports despite the fact that of course the statistics released are the same for everyone. Maybe Mike knows where we are headed.

Thanks again Frank. I sure wish I knew where everything was headed. As Frank alluded to here and what you’ve heard us explain many times over the last several years, the markets are a tough read. It’s difficult to recall a period of time where perceptions, reality, and conjecture stir up such contradictory conclusions.

Speaking of the market, Dane was paying close attention to the markets yesterday so let’s cut over to him and get his thoughts.

The data cupboard was as bare as it gets on Monday, which gave traders time to prepare themselves for the rate decision excitement coming on Wednesday. We finally get some data here this morning with a group of Purchasing Price Index numbers for the last month and the last year. However, as I’m sure you’re seeing on every financial news site you visit, the Main Event is Wednesday’s FOMC rate decision and Fed Chair Janet Yellen’s post-decision remarks. The markets have basically priced in the expected .25% rate hike, so anything other than that would certainly come as a surprise. Beyond that, traders will parse the accompanying statement and Yellen’s comments for any hint of when the NEXT hike might be coming. Wednesday also brings some additional inflation data with monthly Consumer Price Index (CPI) updates.

The big movers overnight were the British pound and the Russian ruble, which both fell by more than .5%. The British pound fell by .72% to 1.2132 on reports that Parliament has given the green light for Prime Minister May to trigger Article 50 and officially begin the Brexit proceedings. May is expected to finalize the move near the end of March. Brexit continues to weigh on the pound, which continues to be one of the worst performing currencies in the last 6 months (down 8.34%).

The ruble is down this morning by .67%, but oil is just about flat on the morning. Last week, Oil gave up the 50 handle it held since December, so this looks like the ruble catching up to the fall in the price of oil. The Russian foreign minister commented overnight about the pressure that shale producers are putting on the oil market, which seems to indicate a rather tempered outlook for oil in the short term.

I suspect that, between the Fed rate hike announcement coming tomorrow and the winter storm expected to blanket the Northeast today (in the middle of March?), markets are likely to remain pretty thin and fairly range-bound. Obviously, that can change at a moment’s notice, but the data today won’t hold a candle to the Wait-And-See plans of most traders for the FOMC decision tomorrow and Yellen’s comments after. As I mentioned above, the real interest of traders is the dot-plot for future rates and any other hints that can find on where we go from here.

Thanks Dane. You’ve seen his name several times in the past and he is quickly becoming a significant contributor, so he will play an integral part in the team effort to bring you the Pfennig this week. As he explained and what is to be expected, we have the makings of another range bound day. Since the UK is officially moving forward with Article 50, it will be interesting to see how the negotiation proceedings play out in the headlines. Other than that, it’s a matter of getting through the day and waiting for the conclusion of the Fed meeting.

That does it for today. So, with that said, have a great day.

Currencies today 3/14/17.. American Style: A$ .7556, kiwi .6909, C$ .7430, euro 1.0629, sterling 1.2126, Swiss $.9914, .European Style: rand 13.1785, krone 8.5851, SEK 8.9368, forint 293.34, zloty 4.0709, koruna 25.409, RUB 59.1537, yen 114.96, sing 1.4143, HKD 7.7690, INR 65.8225, China 6.9118, peso 19.6185, BRL 3.1499, Dollar Index 101.59, Oil $48.65, 10-year 2.61%, Silver $16.98, Platinum $935.25, Palladium $749.50, Gold $1,204.75

Mike Meyer
Vice President
EverBank World Markets
T. 800-926-4922
F. 888-882-0073
mike.meyer@everbank.com

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