>>> FOMC : Flash analysis

Whatever your anticipations may have been, that has to be one of the dullest Fed meeting ever… In other words, hawks and doves may be equally disappointed and/or plain disoriented on that one!
The main points of (dis?)interest are as follows:
Ø “The committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives” even though three members were in favor of a hike (a quite unusual level of dissent actually)
Ø “ Near term risks to the economic outlook appear roughly balanced”
Ø Downgrading of 2016 forecasts for both growth (from 2% to 1.8%) and inflation (from 1.4% to 1.3%)
Ø “Investment spending has been quite weak for some time”
Ø “PCE inflation still short of 2% objective”
Ø New dot plot implies a 25bps hike in 2016 and two hikes in 2017 (against three previously). Also note more dispersion in the dot-plot
Ø More interestingly possibly, no meaningful mention was made of international developments

In a nutshell, the message is that, first, rates should be hiked by 25bps (no less but no more) in December and, second, that, even though dissenters are clearly gaining clout within the FOMC, the pace of liftoff will remain as cautious as can be… Should be rather good news for risk assets overall IN THE VERY SHORT TERM; and in that regard the fact that Janet Yellen said that “asset values are not out of line with historical norms” may not be purely coincidental!
In the longer run, though, the question any investor should ask oneself at this stage is: if hiking rates by 25bps to 0.75% is sooo challenging, what is the real UNDERLYING health of the U.S. economy?... Also, those, including ourselves, who anticipated meaningful curve steepening ahead may have to tone down their expectations a bit now. Therefore expect to see sellers on bounces on financials before too long.
But, meanwhile, indebted and leveraged sectors, commodity stocks in general and oil-related assets in particular (plus, and that is not a paradox, the most “boring” stocks) should logically see some kind of relief-buying, at least in the short term then again. We therefore maintain our overall “buy on dips” stance while clearly tweaking the sector bias as outlined above.
Finally, if we try to take a bit more distance with short term market vagaries, it is interesting to note that Janet Yellen said at one stage: “I do have concerns for the scope of monetary policy”. Well, we do share that concern; maybe not for the same reasons though…

WSJ : WTO Expected to Rule Against EU on Airbus Subsidies

WTO Expected to Rule Against EU on Airbus Subsidies
Similar outcome seen for U.S. handling of Boeing subsidies in battle over tariffs

ONDON—The World Trade Organization is expected to rule Thursday that the European Union failed to adequately eliminate illegal subsidies to plane maker Airbus Group SE, according to people familiar with the finding.

The ruling in the long-running trans-Atlantic trade dispute is expected to be followed by a WTO determination the U.S. similarly didn't sufficiently address concerns about subsidies benefiting Boeing Co., the people said.

At stake are potentially billions of dollars in tariffs the U.S. and EU could be allowed to impose on each other unless the WTO’s subsidy concerns are addressed. Those tariffs, which haven't yet been set and don’t have to be imposed by the winning side, could be applied to trade involving products other than planes or their components.

The U.S. raised its initial objection in the Airbus case in 2004, alleging EU member states gave illegal subsidies to the Toulouse, France-based aircraft maker. The EU quickly launched a similar case against the U.S., arguing that the U.S. illegally subsidized Boeing, the world’s No. 1 plane maker by aircraft built.

“We only needed to make limited changes in European policies and practices to comply,” an Airbus spokeswoman said. “We did what we needed to do, in good faith and in the agreed time frame. We will now see the result in the public release and see with the EU if there are still remaining points to address,” she added.

Airbus and Boeing for years have accused the other of winning business through illegal government handouts benefiting programs such as the European plane maker’s A380 superjumbo or the 787 Dreamliner made by the Chicago-based aerospace giant. Both contend the other received multibillion dollars in financial backing contravening international trade rules.

The aircraft subsidy battle has been slow to make its way through the WTO process. Some of the claims in the case go back 40 years.

Legal experts said it could be many more years before the issue is resolved. “We are not going to get done with this anytime soon,” said Simon Lester, trade policy analyst at the Washington-based Cato Institute.

Mr. Lester said the compliance panel is expected to find some flaw in the actions taken by both the EU and the U.S. to address WTO subsidy concerns. “The question is the extent of the violation, but presumably there is some violation,” he said.

The WTO, European Commission and Boeing declined to comment. The U.S. Trade Representative’s office didn't respond to requests for comment.

The two sides settled a previous dispute over subsidies in 1992, but the U.S. walked away from that deal in 2004, arguing Airbus had an unfair advantage.

In the new round of litigation it took six years for the WTO panel to make its initial ruling that the European plane maker had benefited from illegal state aid. The same year the EU appealed the ruling. Ten months later, the appeals panel modified some of the initial findings, but still found Airbus was in receipt of subsidies.

It didn’t spell out what remedial actions the EU needed to take. The EU said on Dec. 1, 2011 it had moved to address the WTO’s concerns. The panel’s latest ruling is set to judge whether those steps were adequate.

The WTO’s verdict is expected to be followed soon by the EU’s counter-case, first brought by Brussels in June 2005. The U.S. in September 2012 said it had addressed WTO concerns.


Additionally, the WTO before year-end is expected to rule on a further challenged the EU filed against subsidies it alleges Boeing has received for the 777X, its newest long-haul plane. That case was filed in late 2014, but is moving more quickly because its scope is narrower than the earlier two cases. In it the EU is challenging tax breaks Boeing has received linked to the new long-haul plane launched in November 2013.