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December 18, 2015

Global Growth Concerns Linger After Fed Hike

Now that the dust has settled from Wednesday’s interest rate hike by the Fed, investors refocused on the prevailing headwinds for the global economy.  While the Fed’s decision added optimism about the health of the US economy, it did little to alleviate concerns stemming from a slowdown in China.  Oil, credit, and equity markets all continued their recent slide while Treasuries rallied 2-4 bps across the curve.  Volatility in equities was exacerbated by “quadruple witching”, when futures and options contracts on indexes and single stocks expire.

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December 17, 2015

Markets Digest Effects of Fed Liftoff

Stocks reversed some of yesterday’s gains while Treasuries have rallied 1-5 bps across the curve, as markets digested the first FOMC rate hike in almost 10 years.  Yesterday afternoon the FOMC unanimously voted to raise the federal funds target rate by 25 bps to 0.25% - 0.50%, signaling the US economy is on solid enough footing to begin moving away from unprecedented monetary stimulus.  As expected, the Fed emphasized that subsequent hikes will be “gradual” and will depend on incoming data and how the Fed’s forecast evolves.  The Fed’s policy statement cited “considerable improvement” in...

December 16, 2015

All Eyes on the Fed Ahead of Today's Rate Decision

Fed day has finally arrived and markets appear on edge leading up to the announcement.  Equities opened higher before trimming most gains off the back of renewed pressure on oil, while Treasuries are selling off marginally across the curve.  Today’s widely expected rate hike would be the first since June 29, 2006, and comes exactly seven years since the Fed cut rates to zero in the depths of the financial crisis.  The Fed statement, dot plot, Summary of Economic Projections, and Yellen news conference will all be closely scrutinized as market-participants look for clues into the velocity...

December 15, 2015

Happy Fed-mas Eve

Risk assets caught a break from recent selling as stocks, crude oil, and credit markets all rallied back off recent lows as the Fed starts its two-day policy meeting.  A 25 bp interest rate hike is widely expected to be announced tomorrow, but special attention will be paid to the Fed’s guidance regarding the pace of future hikes.  In addition to the FOMC statement at 2pm ET, the Fed will release its updated economic forecasts, followed by Yellen’s press conference.  The press conference will serve as a forum for Yellen to reiterate some of the Fed’s recent themes: policy is still very...

December 14, 2015

Markets Remain on Edge Ahead of Wednesday's Fed Decision

Market volatility remains at elevated levels opening the week, off the back of continued weakness from oil and credit markets and the backdrop of anticipated Fed action this week.  WTI crude briefly fell below $35/barrel for the first time since 2009 after Iran’s deputy oil minister said there was “absolutely no chance” the country would delay oil shipments, adding to concern over a global supply glut.  Iran expects international sanctions stemming from its nuclear program to be lifted the first week in January, and they already have customers lined up for delivery when they begin selling...

December 11, 2015

Pressure on Oil and Emerging Markets Spark Flight to Quality Trade

Equities pushed firmly negative Friday led down by oil and emerging markets, while investors have flocked to the perceived safety of Treasuries today.  Overnight, the People’s Bank of China allowed the yuan to fall the most since its August devaluation to a 4.5 year low.  The PBoC posted an editorial stating the yuan would be better measured using a basket of currencies as opposed to solely pegged to the dollar.  There is no set timetable for a permanent shift in methodology, but the editorial was enough to catch the attention of market participants concerned with the implications of such...

December 10, 2015

Oil Prices Continue to Fall as Investors Shift Focus to Fed

Equities are mostly higher to start the day, diverging from oil price action (which has drifted lower) for the first time this week.  Treasuries and swaps have sold off and currently sit 1-4 bps higher in yield as investors await next week’s FOMC meeting.  Today’s US economic releases showed tepid economic growth, but did nothing to change market expectations for a rate hike next week.  Data released this morning showed the number of Americans filing for unemployment benefits rose to 282,000, a five-month high, compared with economist estimates of 270,000.  The seasonally adjusted claims...

December 9, 2015

Supply Concerns Continue to Put Pressure on Crude

Volatile oil prices continued to be a prevailing theme with equities, Treasuries, and the dollar all seeming to be responding more to oil price volatility than their own fundamentals.  Equities opened higher with merger talks between Dow Chemical and DuPont a key highlight, before turning negative with crude prices, while Treasury yields and swap rates had been 2 - 4 basis points higher, with pressure from both corporate ($15 billion Visa deal) and government ($21 billion 10-year auction) supply.

Markets also continued to closely watch the health of China’s economy and the impact of...

December 8, 2015

Disappointing Chinese Trade Data Renews Global Growth Concerns

Equities continue to trade lower for the second consecutive day while Treasury yields and swap rates drifted down this morning, after weak Chinese trade data and lower commodity prices renewed concerns over the global growth outlook.  The report showed a decline in both Chinese imports (-8.7%) and exports (-6.8%) in November, leaving a trade surplus of $54.1 billion (versus $64Be).  Imports have now fallen 13 consecutive months while exports have fallen five months in a row.  The trade data follows a report last weekend that showed manufacturing conditions in China fell to the weakest...

December 7, 2015

Slumping Oil Prices Weigh on Risk Assets

Appetite for risk is starting the week lower off the back of falling oil prices and a stronger dollar.  US equities have given up part of Friday’s gains, while Treasuries yields and swap rates rallied in the belly and long end of the curve.  WTI crude fell to $38/barrel, its lowest level in almost seven years after OPEC opted not to implement production cuts at its policy meeting last week and U.S. production remains high as well.  OPEC will continue to [officially] produce about 31.5 million barrels a day, above its prior quota of 30 million, at least until they meet again in June.  The...

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