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January 11, 2016

Woes Continue for Oil and Chinese Equity Markets

US stocks fluctuated while Treasury yields and swap rates traded marginally higher across the curve as markets digested another volatile session in China.  Despite a higher peg for the yuan for the second consecutive trading day, China’s Shanghai Composite Index fell 5.3% overnight, bringing its 2016 loss to 14.8%.  Had Chinese regulators not suspended the use of a circuit-breaker designed to control panic selling, trading would have at least been temporarily halted intraday amid the sell-off.  Oil traded under pressure with WTI crude currently trading below $32/barrel.  WTI crude is down...

January 8, 2016

Strong US Jobs Report and Central Bank Intervention in China Calm Jittery Markets

Financial markets stabilized after a relatively calm overnight session in China and a robust US payrolls report helped investors look past this week’s volatility.  Chinese authorities took a number of steps to calm markets, which appeared to be well received by investors.  The People’s Bank of China strengthened the yuan for the first time in nine days, state-backed funds purchased Chinese equities, and the securities market regulator abandoned the new circuit breaker mechanism that some analysts feel may have exacerbated this week’s losses.

Today’s release of the December nonfarm...

January 7, 2016

Growth Fears in China Continue to Weigh on Global Financial Markets

Another China-induced day of volatility for financial markets after the PBoC cut its yuan reference rate for the eighth consecutive day and the most since August.  The move prompted another 7% fall in the benchmark Shanghai index, triggering a circuit breaker which after being open for just 30 minutes, halted trading for the second time this week.  Global equity indexes, other regional currencies, and oil prices were all under pressure in sympathy, with WTI crude hitting $32.10 a barrel, a 14-year low.  Beijing’s attempts at stabilizing the market have so far been considered...

January 6, 2016

Heightened Volatility Continues as China and North Korea Spook Markets

Financial markets extended their volatile start to 2016 off the back of lingering concerns out of China and heightened geopolitical tensions in North Korea and the Middle East.  The PBoC allowed the yuan to fall to its lowest level in nearly five years, while the Caixin-Markit Services PMI showed China’s services sector expanded at the slowest pace in 17 months, adding to fears of a prolonged slowdown for the world’s second largest economy.  Demand concerns and fading hopes of export cuts due to rising tensions in the Middle East caused oil prices to fall more than 5%, dropping below $35/...

January 5, 2016

Markets Remain on Edge with Focus on China and Middle East

US stocks are mixed to lower today while Treasuries rallied marginally after government intervention in China failed to boost investor confidence in the strength of the global economy.  After falling 7% during yesterday’s trading session, the Chinese benchmark Shanghai index finished little changed today despite Beijing’s new market maneuvers in both the foreign exchange and equity markets.  The People’s Bank of China conducted its largest reverse-repo operation since September, injecting nearly $20 billion into the financial system.  Additionally, China’s main securities regulator...

January 4, 2016

Chinese Growth Concerns and Tensions in Middle East Spark Global Stock Sell Off

Financial markets kicked off 2016 in turmoil after disappointing manufacturing data out of China raised concern over the strength of the global economy.  The latest Caixin-Markit manufacturing report showed a decline to 48.2 in December, below the previous reading of 48.6, and missing expectations for an increase to 48.9.  This is the 10th consecutive month that the index has remained below the expansion threshold of 50.  The Caixin report was consistent with the weak NBS manufacturing PMI report which was released by the Chinese government on New Year’s Day.  The combination of weak...

December 24, 2015

Quiet Trading Ahead of Early Christmas Eve Close

Markets appear in full holiday mode ahead of this afternoon’s early close in honor of Christmas Eve.  Both stocks and Treasuries are little-changed, while oil is marginally higher, extending its largest weekly gain in over two months.  The dollar has had a rough week, declining in five straight days for the longest down streak since April.  The strength of the greenback was a major theme throughout the year, but recent weakness has trimmed its annual gain to below 9% against a basket of major currencies.

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December 23, 2015

Personal Income and Spending Growth Boost US Growth Optimism

Equities grinded higher with oil while Treasuries and swaps sold off across the curve after better-than-expected US economic data boosted growth optimism.  The main driver was a Commerce Department report that showed an increase in personal income (0.3%) for the eighth straight month on strong wage growth (0.5%).  Consumer spending, which accounts for over 2/3 of the US economy, also rose 0.3% last month.  With wage growth on the rise, consumer spending is expected to remain strong and should provide the US economy a boost in 2016.  Higher wage growth also suggests the Fed was correct that...

December 22, 2015

US GDP and Talk of Chinese Stimulus Boost Risk Sentiment

Stocks advanced while Treasury yields and swap rates traded marginally higher off the back of a bounce in oil and a stronger-than-expected reading of Q3 GDP.  The Commerce Department’s third estimate of Q3 GDP showed consumer and business spending helped the US economy grow 2.0% QoQ, down from the 2.1% prior reading, but ahead of the 1.9% economists were expecting.  Weak net exports due to slow growth overseas and a strong dollar continued to weigh on US growth.  While the headline 2.0% growth number is a sharp decline from the 3.9% pace in the second quarter, the number is steady and...

December 21, 2015

Slumping Oil Prices Set the Tone to Kick off Christmas Week

Equities opened the week higher before paring some gains while oil extended its slump off the back of global supply concerns.  At one point WTI crude touched below $34/barrel, its lowest price since February 2009, while Brent hit an 11-year low of $36.04.  Production is running close to record highs, while global demand remains tepid due to weak growth in China and Europe.  Furthermore, President Obama signed a law on Friday that ends the 40-year ban on US crude exports, which will narrow the premium of Brent over WTI.  With warmer-than-expected temperatures in the US and Europe also...

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