US markets ended mildly lower last night after see-saw price actions. DJIA lost -12.67 pts or -0.08% to close at 16014.38 while S&P 500 lost -1.23 pts or -0.07% to close at 1852.21. Crude oil finally let go out 30 handle and dipped to as low as 27.74 and is trading around 28.4 for the moment. 10 year yield breached 1.7 briefly to 1.699 but recovered to close at 1.729. Risk aversion then came back in Asian session with Nikkei extending yesterday's -5.4% decline and is trading down -397 pts, or -2.47% at the time of writing. In the currency markets, Swiss Franc and Yen remain the strongest major currencies this week. Additional selling in Sterling has pushed it to be the weakest one, overwhelming commodity currencies. Dollar is mixed as markets await Fed chair Janet Yellen's testimony today.
Fed chair Janet Yellen will testify before House Financial Services Committee today and Senate Banking Committee tomorrow. As of yesterday, Fed fund futures are pricing in 5% chance of rate hike by June, 11% by September and 21% by December. Yellen would likely face some tough questions regarding the rate hike last December, in particular after the recent market turmoils. But more importantly, markets will pay attention to hints from Yellen on the rate path this year. there were talks earlier this year that Fed could hike as many as 3-4 times this year but policy markets have backed off from this predictions. Some economists noted that the market turmoils were so far so enough to pause the tightening cycle as there is no evidence of slowdown in US. On the other hand, there are some far-fetched speculations that Fed would eventually going into a negative interest rate policy.
In Eurozone, Bundesbank Governor Jens Weidmann inflation outlook would be a key topic of discussion in the March ECB meeting and "inflation forecasts for this year will need to be substantially reduced". Meanwhile, Bank of France governor Francois Villeroy de Galhau said that the battle "waged on the deflation front" was "not over". ECB is expected to "reconsider" monetary policy in the coming March meeting. JPMorgan (N:JPM) forecast that ECB would push deposit rate aggressively further to for another -40bps to -0.70% later this year. And JPMorgan expected ECB to start lowering deposit rate to -0.5% in March first.
On the data front, Australia Westpac consumer confidence rose 4.2% in February Japan domestic CGPI dropped -3.1% yoy in January. UK productions will be the focus in European session and NIESR GDP estimate will be released later in the day. US will release crude oil inventories and Fed budget statement.