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December 4, 2015

Payrolls Don't Disappoint

Nonfarm payrolls increased 211,000, exceeding the 200,000 consensus, while September and October data was upwardly revised by 35,000.  Average hourly earnings increased 0.2% MoM after a robust 0.4% uptick in October, and the unemployment rate held steady at a 7.5-year low of 5.0%.  The strong report indicates an improving US economy and further solidifies the prospects of the Fed hiking short rates at the December 15-16 meeting.  Speculation and market shifts going forward will likely be more focused on the Fed’s characterization of the pace of subsequent hikes in 2016 and beyond.  Fed...

December 3, 2015

ECB Announcement Disappoints as Investors Gear up for Friday Payrolls

Equities are down sharply today, while Treasuries and swap rates are up more for the day than they have moved in over 9 months, after the European Central Bank’s expanded stimulus fell short of market expectations.  The ECB cut its deposit rate by 10 bps pushing it further into negative territory, but left the benchmark rate and amount of monthly asset purchases (EUR 60 billion) unchanged.  They also pushed out the maturity date of quantitative easing by 6 months, from September 2016 to March 2017 “or beyond”, and broadened the range of eligible assets to include local and regional...

December 2, 2015

Strong ADP Jobs Report and Hawkish Fed Comments Reinforce Likelihood of December Rate Hike

Equities are trading moderately lower while Treasury yields and swap rates are higher across the curve off the back of stronger-than-expected US jobs data.  The ADP’s private payrolls report showed companies added 217,000 workers in November following an upwardly revised 196,000 gain in October.  The headline number is the largest since June and handily exceeded the 190,000 analysts were expecting.  The report underscores the health of the US labor market and is likely to ratchet up expectations for Friday’s nonfarm payrolls report.  The dollar is rallying against most major currencies on...

December 1, 2015

Investors Sift Through Variety of Economic Reports Ahead of Tomorrow's Speech from Yellen

Equities are generally rallying today with Treasuries and swaps down in yield as markets digested a mixed bag of economic reports around the globe.  Manufacturing data in China remained weak, but a better-than-expected reading of the Caixin/Markit manufacturing PMI fueled optimism that the factory slowdown in China may be turning a corner.  In Europe, Germany’s unemployment rate fell to a record low of 6.3% last month, and manufacturing PMIs in the region for the most part narrowly beat expectations.  While the general tone of the data in both China and Europe was decent, both the People’s...

November 30, 2015

Quiet Start to Busy Week as Markets Set Up for ECB and Payrolls

US markets kicked off the week fairly quietly, with stocks down marginally and Treasury yields and swap rates largely unchanged.  Between month-end, the ECB meeting, Yellen’s speech before the Joint Economic Committee, and the final payrolls report of the year all on tap this week, activity is likely to pick up as December gets underway.  One of the key themes this week is the divergence of policy between the Federal Reserve and European Central Bank.  Unless Friday’s payrolls report dramatically misses expectations, the Fed is expected to hike rates when it meets later in the month, while...

November 27, 2015

Markets Struggle for Direction in Quiet, Post-Turkey Trading Day

As one might expect, US market activity was extremely quiet the day after Thanksgiving.  Technically both equity and fixed income markets are open for a half day, but there are no economic releases or Fed speakers, so volumes are light.  Equities have barely moved from Wednesday’s close, while Treasuries and swaps caught a slight bid off the back of an overnight rout in Chinese stocks.  The Shanghai benchmark composite fell 5.5%, bringing back memories of the freefall in Chinese stocks in August of this year.  The catalyst in today’s selling was the release of Chinese industrial profits,...

November 25, 2015

Quiet Trading Day as Thanksgiving Holiday and Easing of Russia / Turkey Tensions Overshadow Robust Economic Calendar

Equities and Treasuries both fluctuated on either side of unchanged while oil prices declined off the back of de-escalating tensions between Russia and Turkey. Russia defiantly pledged to continue flying missions near Turkish air space and spoke of potential retaliatory economic measures, but both countries stated they have no intention of engaging in a military conflict (a day after Turkey shot down a Russia warplane flying close to the Syrian border).  Regardless, the conflict threatens to complicate international talks in Vienna aimed at finding a political solution for Syria.

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November 24, 2015

Positive US GDP Takes Backseat to Geopolitical Events in the Middle East as Russia/Turkey Incident Dominates Headlines

Equities fluctuated while oil and Treasuries rallied off the back of increased turmoil in the Middle East.  The main development was news that Turkey shot down a Russian warplane flying close to the Syrian border.  The Turkish military claims the Russian jet was in violation of its airspace and ignored repeated warnings, while Moscow denies the plane ever left Syrian airspace.  This event is noteworthy because Turkey is part of NATO, whose member nations are mandated to defend one another from aggression, which could further complicate relations in the region.  This marks the first time a...

November 23, 2015

Quiet Start to Holiday-Shortened Week Despite Full Calendar of Economic Events

Markets opened the Thanksgiving week fairly quiet despite a heavy calendar of economic releases, Fed speakers, Treasury supply, and ongoing heightened terror concerns.  Stocks and crude have traded close to unchanged after giving up early advances, while Treasury yields and swap rates are up roughly 1 basis point from Friday’s close.  Key market headlines included a pledge from Saudi Arabia to work on crude price stability, which was met with some skepticism, and an announcement that pharmaceutical giant Pfizer will purchase Allergan in a $160 billion deal.

Today’s key economic data...

November 20, 2015

Markets Finish the Week Mostly Unfazed Despite Continued High Terror Alert and Immigration/Refugee NIMBY Battles

A week after the Paris attacks, and despite the battles in Congress and across the 50 individual states regarding closing borders/refusing refugees, most of the financial markets have held up fairly well.  We did not see much of the risk-off/flight to quality retreat one might have expected.  Since last Friday, U.S. stock indices are up 3%+, while the dollar is mostly flat against other major currencies, commodity prices including gold are mostly unchanged, while the U.S. rate environment is generally close to last Friday’s levels, albeit the curve has flattened with short rates up a few...

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