Mexico: We expect Banxico to cut interest rates two times this year – BBV…

The central bank of Mexico (Banxico) has enough reasons to begin to soften its wording on inflation as soon as in next month’s statement, according to analysts at BBVA. They expect a dovish shift on the growth picture deterioration, slowing inflation pressures and a more dovish Fed

Key Quotes: 

“We now expect the easing cycle to begin in August, we do not rule out an earlier start.” 

“Is it still too soon for a dovish shift? We think that there are enough reasons for Banxico to begin to soften its wording on inflation as soon as in next month’s statement (March 28). We expect the Board to acknowledge that even if inflation risks are still skewed to the upside, the balance of risks has markedly improved, and with a steeper economic deceleration than previously thought, risks to the upside and downside seem more balanced now.” 

“We now think Banxico will start easing its policy rate in August and we now anticipate two 25bp rate cuts this year (in August and November). We continue to expect 100bp of rate cuts next year, i.e 6.75% by December 2020. We think that Banxico has enough reasons to acknowledge that inflation is on a downward trend and risks have eased. In a context of a negative output gap, demand-side pressures will remain absent. With pledges from the Fed to be patient with its hiking cycle, the probable need to keep a wide interest rate spread is no longer there.”

“The current stance of monetary policy has become more restrictive than appropriate. Therefore, we now expect the easing cycle to begin in August and we do not rule out that it could even begin earlier, in June. Thus, we do not rule out three rate cuts this year.”

USD/CHF trims losses fut remains below 1.000

  • US dollar outperforms during US session after data. 
  • Swiss franc retreat but still among top performers of the day. 

The USD/CHF pair rebounded during the US session supported by a rally of the US dollar across the board. It climbed from 0.9925 (lowest since February 1) to 0.9995 and then pulled back modestly. It was trading at 0.9970, 40 pips below yesterday’s close but far from the lows. 

The Swiss franc is among the top performers despite the rally of the dollar. The greenback gained momentum after the release of US GDP Q4 numbers that came in above expectations. “GDP for Q4 came in at 2.6 % q/q annualized, indicating some slowing of growth as expected. Going forward, visibility of the GDP numbers will be hampered by the government shutdown and other information sources are needed to gauge underlying trend”, said Kjetil Olsen, macro-economist at Nordea. Also the Chicago PMI report (best reading in 14 months) favored the greenback. 

The DXY bounced from weekly lows near 95.80 back above 96.00. It reached 96.28 before turning flat for the day at 96.10/15. A main driver behind the dollar’s strength was the upsurge in US bond yields. The 10-year rose to 2.72% , highest intraday level since February 5. 

Levels to watch 

The USD/CHF chart still pint to the downside, particularly with the pair unable to recover levels above 0.9985. Although the bounce of the US dollar took the momentum out of the Swiss franc. The critical level to the upside is seen around 1.0015/20, the weekly high and also the 20-day moving average: a break higher would clear the way to more gains. To the downside, support levels might lie at 0.9950, 0.9925/30 (Feb 28 low) and 0.9900. 

 

Fed’s Kaplan: US growth in 2019 to slowdown amid waning fiscal stimulus, …

Dallas Fed President Robert Kaplan recently crossed the wires saying that he continues to advocate the Fed’s patient stance and pause on rate hikes. The US Dollar Index didn’t react to Kaplan’s comments and was last up 0.02% on the day at 96.13.

Key quotes (via Reuters)

  • Global growth is decelerating.
  • China continues to use debt to ‘plug the gap’.
  • There is a number of downside risks, uncertainties.
  • U.S. growth in 2019 will be slower given waning fiscal stimulus, higher rates.

The Ratings Game: Box shows off ‘worst execution’ since IPO as stock tumb…









Box Inc. shares are plunging toward their worst day in a year after the company reported a quarter that showcased its “worst execution since its 2015 IPO.”

That’s according to Canaccord Genuity analyst Richard Davis, who became less upbeat about the company’s prospects following the report. Davis highlighted Box’s














BOX, -18.63%












 inability to secure big deals during the latest quarter—it logged just two seven-figure deals in the period, versus nine a year earlier—as well as its “exceptional weakness” in Europe, the Middle East, and Africa. That region has persistently proven a sore spot for Box.

But Davis isn’t ready to give up on Box just yet. “It would have been cathartic to downgrade Box” after the latest earnings and downbeat outlook, he wrote, but “the reality is that, most times, after the anger selling is done, the stock typically makes back upwards of half of the beatdown over the next month or so.” Plus, he sees potential for a private-equity buyout at $25 to $30 a share.

The stock is down more than 19% in midday trading Thursday to about $20.

Davis has what he calls “a poorly chosen buy rating” on the stock and a new price target of $24, down from $30 prior to the report, but he cautioned that “it rarely makes sense to rush for the exits with everyone else.”

Don’t miss: Here’s what hedge-fund manager Doug Kass foresees triggering a one-day stock plunge of 5%

Monness, Crespi, Hardt & Co. analyst Brian White described the company’s financial outlook as “very troubling” and labeled the tone of Box’s earnings call as troubling as well.

“Box continues to expand its portfolio, enhance its ecosystem and unveil new innovations; however, lackluster financial results in a competitive market keep us on the sidelines with a neutral rating,” he wrote.

See also: Dropbox stock falls 10% after margin guidance disappoints

Morgan Stanley’s Melissa Franchi expressed her disappointment that the company’s new focus on strategic selling isn’t yielding strong results, as Box only posted a 16% gain in bookings during the fourth quarter.

“While there are some encouraging metrics that suggest it may just be too early, investors’ patience is likely to be tested,” she wrote. Box did post 19% growth in deals valued over $100,000, Franchi said, with 80% of them being for more than one Box product, but until the company can show better revenue trends, “there will likely be continued debate on the health of the core market, competitive dynamics, and Box’s ability to execute consistently.”

She rates the stock at equal weight and cut her target to $19 from $21.

William Blair’s Jason Ader said he was “keeping the faith” following the report, writing of his optimism about Box’s “technology vision and solution set in the fragmented but large cloud content management market.” He argued that there’s potential in the company’s new Box Shield security product as well as new bundles.

Box’s stock is still in the green this year even with Thursday’s massive drop. Shares have gained 19% since the start of 2019, while the S&P 500














BOX, -18.63%












 has risen 11.4%.



























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Emily Bary is a MarketWatch reporter based in New York.


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US: Stronger-than-expected GDP outturn should alleviate some concerns – W…

The US economy expanded at an annualized rate of 2.6% during the fourth quarter, above expectations. According to analysts from Wells Fargo, the stronger-than-expected GDP outturn should alleviate some concerns that the economy is in serious trouble. They forecast looks for further deceleration in the first quarter (real GDP to grow roughly 2% in Q1) and a modest rebound starting in Q2. 

Key Quotes: 

“The outturn was stronger than the 2.2% rate that the market consensus had expected, but it still represents a stepdown from the very strong growth rates that were registered earlier in the year.”

“The breakdown of the GDP data into its underlying demand components showed that the deceleration was led by real personal consumption expenditures (PCE), which grew 2.8% in Q4. Real PCE was boosted, at least in part, earlier in the year from the personal tax cuts that were part of the Tax Cuts and Jobs Act (TCJA) of December 2017. Although the real income-boosting effects of the tax cuts will fade over time, income growth should remain solid due to the robust labor market.”

“The effects of the government shutdown,  which started in December, also showed up in the data as non-defense federal government spending tumbled at an annualized rate of 5.6% in Q4. Because the shutdown lasted into January, this component of spending likely will be weak in Q1 as well before rebounding in Q2.”

“Growth is probably not strong enough right now to induce the Fed to resume its tightening cycle. But we look for the FOMC to tap on the brakes again with another 25 bps rate hike later this year (probably sometime in the third quarter).”

One of every 10 Brits has never worked, data from U.K.’s Office for Natio…









No matter how hard you work, Elon Musk once said, someone else is working harder.

The serial entrepreneur and Tesla














TSLA, +0.32%












CEO would not be impressed with the latest figures in the U.K. showing a tenth of Brits have never worked.

Unemployment is at a 44-year low, and employment is at a record high, but an astonishing 3.6 million adults have never been paid for work, official figures from the Office for National Statistics show.

The data cover a period between July 2017 and June 2018.

The lion’s share of these adults, unsurprisingly, are students engaged in full-time educational pursuits.

Young people 16 to 24 years old represent most of the population that has never had a paid job — 71%, including students.

Since 2008 the number of people who have never worked has grown by 270,000, largely due to a 15% increase in the number of 16- to 24-year-olds who are studying and are yet to take on paid work.

Said U.K. Universities Minister Chris Skidmore on Thursday: “The dream of a higher education has become a reality in this country for more people than ever before.

“Since 2009, we have witnessed a proportional increase of 52% in the entry rate of disadvantaged 18-year-olds to full-time higher education.”

The figures also show a small lift in the number of stay-at-home dads, and male homemakers. “There has been a small rise in men who have never been paid for work and are looking after the family or home, driven by households with no dependent children,” reports the ONS.

More women with young children have been juggling jobs. The data show that since 2008 there has been a 19% reduction in the number of women with a child 3 years old or younger who have never done paid work.



























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Rex Nutting: Trump delivered an economic sugar high, not the transformati…












The stimulus boosted the economy’s potential growth rate temporarily.

The U.S. economy had a very good year in 2018 but it was not the game-changer that the Trump administration promised.

The nation’s gross domestic product grew at 2.9% during the year, according to the preliminary estimates by the Commerce Department released Thursday. That’s the best growth in three years, but it’s quite likely that this is as good as it will get.

During the campaign of 2016, Trump insisted that he could boost the economy’s long-term, sustainable growth rate to 3% or even more by unleashing the productivity of the private sector. But it turns out that getting to 3% growth and staying there is harder than Trump and his aides counted on.

How unlikely is achieving sustainable 3% growth? It would require productivity growth rates to triple. Or a massive influx of immigrants.

Also: Sorry, Mr. Trump, but the only way to get to 3% growth is to hire more Mexicans

The stimulus from the big tax cut enacted in late 2017 and the big federal spending bill of early 2018 delivered a nice but temporary jolt to the system, but the impact is already beginning to wear off. A year ago, forecasters expected that the fiscal policy stimulus would boost GDP to around 3% in 2018, but then gradually fade away, leaving the economy’s potential growth right where it was.

That forecast still looks spot on. Most forecasters see the economy slipping to around 2.5% in 2019 and to 2% in the first years of the next decade.

For the current quarter, the latest estimate from well-regarded forecasters at IHS Markit is for growth of 1.1%.

The economy was stimulated but not transformed by the tax cut. Business investment jumped 7% for the year, but that was actually less than the 8.5% growth that the Congressional Budget Office predicted at the beginning of the year.

Most of the investment was front-loaded into the first half of the year, when business investment expanded at a 10% annual rate. In the second half of the year, however, investment growth slipped to just 4%, not much more than it grew in mid-2016 and less than half of the growth rate of the late 1990s.

Businesses turned cautious for a number of reasons: Trump’s saber-rattling on trade rattled executives’ confidence in their return on investment. Slower global growth magnified those worries.

The bright spot in 2018 was a boom in investments in intellectual property, such as software, research & development, and artistic works. For the year, these investments increased 7.7%, beating the 7.5% gain in 2016 for the best year since 2000’s 9.5%.

Such investments can be the key to increasing the economy’s productivity and potential growth rate — if they continue.

As I reported in August, most of these investments in the first half of the year came from technology and pharmaceutical companies, with particularly large investments from Amazon














AMZN, +0.30%












 , Google














GOOG, +0.93%












 , Microsoft














MSFT, +0.36%












 , Apple














AAPL, -0.39%












 and Intel














INTC, -0.51%












 .

To permanently boost potential growth rates, we’ll need more than just a few companies investing in new products and services. We haven’t seen that yet, and so the economy is still stuck in a 2% rut.






























Rex Nutting is a columnist and MarketWatch’s international commentary editor, based in Washington. Follow him on Twitter @RexNutting.


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Rex Nutting: Trump delivered an economic sugar high that is about to wear…












The stimulus boosted the economy’s potential growth rate temporarily.

The U.S. economy had a very good year in 2018 but it was not the game-changer that the Trump administration promised.

The nation’s gross domestic product grew at 2.9% during the year, according to the preliminary estimates by the Commerce Department released Thursday. That’s the best growth in three years, but it’s quite likely that this is as good as it will get.

During the campaign of 2016, Trump insisted that he could boost the economy’s long-term, sustainable growth rate to 3% or even more by unleashing the productivity of the private sector. But it turns out that getting to 3% growth and staying there is harder than Trump and his aides counted on.

How unlikely is achieving sustainable 3% growth? It would require productivity growth rates to triple. Or a massive influx of immigrants.

Also: Sorry, Mr. Trump, but the only way to get to 3% growth is to hire more Mexicans

The stimulus from the big tax cut enacted in late 2017 and the big federal spending bill of early 2018 delivered a nice but temporary jolt to the system, but the impact is already beginning to wear off. A year ago, forecasters expected that the fiscal policy stimulus would boost GDP to around 3% in 2018, but then gradually fade away, leaving the economy’s potential growth right where it was.

That forecast still looks spot on. Most forecasters see the economy slipping to around 2.5% in 2019 and to 2% in the first years of the next decade.

For the current quarter, the latest estimate from well-regarded forecasters at IHS Markit is for growth of 1.1%.

The economy was stimulated but not transformed by the tax cut. Business investment jumped 7% for the year, but that was actually less than the 8.5% growth that the Congressional Budget Office predicted at the beginning of the year.

Most of the investment was front-loaded into the first half of the year, when business investment expanded at a 10% annual rate. In the second half of the year, however, investment growth slipped to just 4%, not much more than it grew in mid-2016 and less than half of the growth rate of the late 1990s.

Businesses turned cautious for a number of reasons: Trump’s saber-rattling on trade rattled executives’ confidence in their return on investment. Slower global growth magnified those worries.

The bright spot in 2018 was a boom in investments in intellectual property, such as software, research & development, and artistic works. For the year, these investments increased 7.7%, beating the 7.5% gain in 2016 for the best year since 2000’s 9.5%.

Such investments can be the key to increasing the economy’s productivity and potential growth rate — if they continue.

As I reported in August, most of these investments in the first half of the year came from technology and pharmaceutical companies, with particularly large investments from Amazon














AMZN, +0.29%












 , Google














GOOG, +0.93%












 , Microsoft














MSFT, +0.37%












 , Apple














AAPL, -0.38%












 and Intel














INTC, -0.51%












 .

To permanently boost potential growth rates, we’ll need more than just a few companies investing in new products and services. We haven’t seen that yet, and so the economy is still stuck in a 2% rut.






























Rex Nutting is a columnist and MarketWatch’s international commentary editor, based in Washington. Follow him on Twitter @RexNutting.


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Economic Report: Homeownership rate reaches four-year high in the fourth …










tashka2000


Millennials are finding ways to eat avocados and buy houses.

The numbers: The homeownership rate rose to a seasonally adjusted 64.6% in the fourth quarter, up by 0.2 percentage points from the third quarter, the Commerce Department said Thursday. That’s the highest since the third quarter of 2014.




























What happened: Millennials are buying houses. The 61.1% home ownership rate for those between 35 and 44 years old was the highest in more than five years.

After graduating into a recession while being addled with student debt, that cohort is recovering, helped as the unemployment rate has dropped to 4% from as high as 10% when the Great Recession ended.

The rental vacancy rate, meanwhile, fell to the lowest level in 33 years, a sign of tight supply for rental properties.

The big picture: How much higher homeownership will rise is a subject of debate as house price growth, up until very recently, has run far ahead of wage growth. The Tax Cuts and Jobs Act has made the mortgage interest deduction less of an incentive, since fewer taxpayers will itemize with the standard deduction doubling.

Still, much of housing’s future depends on the broader economy, which despite turbulent headlines still grew at nearly a 3% rate last year. With jobs comes the ability to own a house: a recent report from the Urban Institute found that 27% of renters earned at least as much as households who recently purchased a home using a mortgage.



























Steve Goldstein is MarketWatch’s Washington bureau chief. Follow him on Twitter @MKTWgoldstein.


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Feds ban for-profit college chain Argosy from student loan program









The Department of Education kicked a major for-profit college chain out of the federal financial aid program, likely putting it at risk of shutting down.

The decision to block Argosy University, which has campuses in Arizona, California, Virginia and elsewhere, from accessing federal financial aid comes after months of alleged financial mismanagement by the school, including failing to pay more than $16 million in stipends — the financial aid that college students rely on to pay non-tuition expenses — according to a letter sent Wednesday to Argosy by Department of Education officials.

The decision to cut Argosy off from the federal financial aid program is the latest development in a years-long battle over Argosy’s ownership and future as its thousands of students wait in limbo. Colleges, for-profit schools in particular, rely heavily on federal financial aid funds to function. Kicking the school out of the program could effectively be its death knell.

“It certainly seems to me like we are headed toward another round of local news stories about students showing up to closed doors,” said Ben Miller, the senior director of postsecondary education at the Center for American Progress, a left-leaning think tank.

Argosy has until March 11 to dispute the Department’s findings. In the letter sent by Michael J. Frola, the director of the Department’s multi-regional and foreign schools participation division, the agency accused Argosy’s parent organization of using more than $12 million in federal financial aid funds to pay its staff, vendors and others before distributing it to students.

Are you an Argosy student? We want to hear from you. Email jberman@marketwatch.com

The controversy over Argosy dates back to at least March 2017 when the school was one of three for-profit chains sold by its parent company, Education Management Corporation, to Dream Center Educational Holdings, a nonprofit.

At the time, the sale of the three chains — Argosy, South University and the Arts Institutes — was controversial among consumer advocates, who often view a transfer of a for-profit college to a nonprofit organization as a way to escape regulatory scrutiny. They were also skeptical of the nonprofit’s executive team, which included the former chief executive officer of another controversial for-profit institution.

Dream Center ultimately faced scrutiny over claims it misled students about the accreditation — a crucial seal of approval for a college to function — of some of its campuses, among other issues.

Ultimately, faced with challenges running the three chains and pressure from the Department of Education, Dream Center says, the organization essentially transferred ownership of South University and Arts Institutes to a different company, known as Studio, and its related nonprofit. Late last year, Dream Center entered a receivership, a form of bankruptcy. Now, Studio and the receiver overseeing Dream Center’s holdings are in a legal battle over the missing financial aid funds.

The battle, which has largely played out in court rooms and behind closed doors, has been “a disaster for students as well as for faculty and staff,” said David Halperin, an attorney and for-profit college critic who has reported extensively on the Dream Center controversy.

As part of the sale, Dream Center planned to turn the three chains into nonprofits. The Department’s Wednesday letter also denied Argosy’s shift to nonprofit status. “We are disappointed at the decision by the Department of Education today to deny Argosy University’s request for change of ownership,” said Mark Dottore, the court-appointed receiver for Dream Center. “We are working to determine the best path forward for students at this time.”

But for Miller, the chain’s turmoil is a sign that “this is a deal that never should have been made,” Miller said, referring to the sale of the three chains to the Dream Center. “Letting it linger has only exposed more students to harm.”

If Argosy ultimately closes, its students will be left with some unpalatable choices. If they attended the school within 120 days of its closure, they can have their federal student loans wiped away, under what’s known as a closed-school discharge, as long as they don’t try to finish their course of study elsewhere. They could also try transfer their Argosy credits to a new school and continue with their degree program — but would not be eligible for the closed-school discharge. Students who attended for-profit colleges often face challenges getting credit for their courses at other schools.

Miller said he’d like to see the Department extend the window students who are eligible for a closed-school discharge back to at least October 2017, when the controversial sale to Dream Center was approved.

Argosy is the latest for-profit college chain to collapse over the past several years in the face of regulatory scrutiny and financial pressure. Corinthian Colleges and ITT Technical Institutes collapsed in 2015 and 2016 respectively over claims they misled students about graduation and job placement rates. Education Corporation of America, the parent company of schools like Virginia College and Brightwood Career Institute, shut down late last year.

All of these cases were preceded by the Department of Education tightening schools’ access to government loans and grants.

The battle over Argosy’s future and the havoc it’s wreaked on its students suggests to Miller that the Department of Education, which is focused on educational quality, should more closely scrutinize business dealings as part of its oversight of these schools.

“A business-oriented look at the initial deal would have turned up enough red flags,” he said.






























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Jillian Berman covers student debt and millennial finance. You can follow her on Twitter @JillianBerman.


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