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February 9, 2016

Volatility Increases on Bank Capitalization Concerns

US stocks and Treasuries both struggled for direction as investors assessed the global economic outlook following a volatile session for international equities.  Japanese stocks plunged 5.4% overnight, the largest daily drop since June 2013, on global growth concerns and renewed strength in the yen.  The rise in the yen is particularly troubling because it has occurred just a week after the Bank of Japan implemented a negative interest rate policy.  One would expect the opposite market reaction, which indicates central bank stimulus make be losing some of its effectiveness.  Japan became...

February 8, 2016

Signs of Global Slowdown Spur Flight to Quality Trade

Despite China markets being closed this week in celebration of the Chinese New Year, the rest of the global stock markets declined Monday, while investors piled into Treasuries, gold and other safe havens off the back of continued concerns over the health of the global economy.  Part of the negative sentiment could be attributed to a third straight day of pressure on oil prices.  Data last week showed US crude and gasoline inventories hit record highs, and a weekend meeting between Saudi Arabia and Venezuela did little to boost confidence that OPEC members will soon reach an agreement to...

February 5, 2016

Uptick in Wages Complicates Fed Outlook

Both US stocks and Treasuries traded under pressure while the dollar rallied after this morning’s release of the January nonfarm payrolls report.  The report contained some mixed signals on the strength of the jobs market, but there were enough positive data points to keep the prospects of 2016 Fed rate hikes alive.  The headline payrolls number showed US employers added 151,000 workers last month, falling short of the 190,000 market consensus, and down from the lofty November and December results.  Markets largely ignored the headline miss, however, instead focusing on the underlying...

February 4, 2016

Weak US Data Adds to Pressure on USD

US stocks are trading mixed while Treasuries rallied a few basis points across the curve as investors digested the latest batch of disappointing economic data.  The number of Americans filing applications for unemployment benefits rose last week, while a separate report showed a 218% jump in announced job cuts by US employers in January.  The two reports indicate momentum in the labor market may be waning just one day after a report showed the US service industries grew at the slowest pace in two years last month.  Weekly jobless claims have been trending higher since reaching a forty year...

February 3, 2016

Markets Fluctuate on Mixed US Economic Data

US stocks and Treasuries have both struggled for direction today with the release of generally mixed US economic data.  Markets opened poised for a risk on day as stocks opened stronger on firmer oil prices and a stronger-than-expected ADP Employment report.  The ADP report showed private employers added 205,000 jobs in January (195,000 estimated) after a 267,000 increase in December.  Manufacturers and energy companies reduced headcount, as expected, but job gains were broad across most other industries.  January is the third consecutive month that job gains exceed 200,000, indicating the...

February 2, 2016

Weaker Oil Hits Stocks and Boosts Treasuries

Global equities have declined once again while Treasuries rallied (down 6 to 7 basis points) across the curve as heavy pressure on oil prices renewed concerns over the health of the global economy.  WTI crude temporarily slid below $30/barrel as traders refocused on supply/demand fundamentals with hopes for a supply-reducing agreement between OPEC and Russia quickly evaporating.  Despite some optimism last week, Goldman Sachs said it was “highly unlikely” that OPEC would cooperate with Russia on production cuts, saying the biggest benefactor of such a move would be the United States.  ...

February 1, 2016

Equities and Oil Prices Dragged Down by Weak Chinese and US Data

US stocks and oil prices declined after disappointing Chinese economic data renewed concerns over a global slowdown.  Data showed China’s manufacturing sector contracted at its fastest pace in three-and-a-half years in January, missing analyst expectations, and remaining below the contraction/expansion line of 50 for the sixth consecutive month.  China’s non-manufacturing PMI also declined, but remained in expansionary territory, which underscores the relative strength of the services sector that has been an important source of growth and jobs for the world’s second largest economy vis a...

January 29, 2016

Stocks and Treasuries Both Advance on Surprise BoJ Announcement

Global stocks and Treasuries both rallied on the last trading day of January after the Bank of Japan unexpectedly introduced negative interest rates, just days after saying such a move wasn’t being considered.  The BoJ will now charge 0.1% on certain excess holdings of cash in a move intended to spur bank lending.  The 5-4 vote in favor of the cut will augment the BoJ’s quantitative easing program, which remained unchanged otherwise.  Japan’s central bank joins the ECB and central banks of Sweden, Denmark and Switzerland in introducing this unorthodox move.  BoJ Governor Kuroda also...

January 28, 2016

Oil Boosts Risk Assets but Markets Struggle for Direction After Timid Fed Statement and Mixed Data

US stocks and Treasuries both fluctuated as investors digested yesterday’s FOMC announcement, mixed economic data, and corporate earnings.  The Fed statement didn’t contain any major surprises as the rate policy remained unchanged, but there were some notable changes in the language that the market interpreted as largely dovish.  The Fed retained asymmetric guidance language which suggests that its next move remains a tightening, but the tentative tone did nothing to suggest that a move at the next meeting in March is likely.  The statement omitted the key phrase that the Fed is “...

January 27, 2016

Markets Fluctuate Ahead of FOMC Announcement

US stocks struggled to sustain yesterday’s momentum following disappointing corporate earnings while Treasuries sold off marginally ahead of today’s FOMC announcement.  Apple weighed on both the S&P 500 and Nasdaq after the company reported its slowest-ever rise in iPhone shipments during last night’s earnings release.  CEO Tim Cook sounded bearish on the global economy, telling analysts that he’s beginning to see “extreme conditions unlike anything we’ve experienced before just about everywhere we look”.  He specifically mentioned “economic softness” in China as a downward risk to the...

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