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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...

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,...

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