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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...

November 19, 2015

Lift Off Unless New Data Proves Not Needed, Instead of No Lift Off Until Proven Necessary

Believers in an FOMC quarter point move in December continue to gain confidence, after recent Fed Governor speak and the release of the October FOMC meeting minutes.  The Fed minutes indicated that most voting members believed in October that either 1) there was already enough evidence that a December rate hike was warranted or 2) there would be sufficient evidence by December.  There was also concern expressed by several participants who feared that not making their first move in over 7 years at their next meeting would risk 1) showing a lack of confidence in the economy, 2) leaving more...

November 18, 2015

Markets Appear to Be Getting Comfortable Preparing for First FOMC Rate Liftoff in December

U.S. stocks are rallying again today, indicating the market’s ability to absorb the international terror threats post-Paris, along with the continued expectation of a Fed tightening in December.  The highlighted economic data today included Housing Starts and Industrial output, both of which came in weaker than expected.  That said, core manufacturing did show positive signs vs. the previous month, despite the drag on overall output from the energy sector.

A number of Fed governors were on the tape today as well, indicating their continued support for a December rate hike.  As shown...

November 17, 2015

US Inflation Data Consistent with Growing Case for December Fed Action

Stocks and the dollar grinded higher while Treasuries and swaps sold off marginally off the back of better-than-expected corporate results and US economic data.  Strong results from Home Depot and Wal-Mart boosted confidence in the US consumer, and data showed US consumer prices increased in October after two consecutive months of declines, a sign that inflation may be turning a corner.  Oil remained a drag on the headline number, which rose 0.2%, in line with analyst estimates, but core CPI, which excludes the volatile food and energy components, is now up 1.9% over the past year.  Some...

November 16, 2015

Risk Assets Grind Higher as Markets See Limited Impact from Paris Attacks

Stocks rallied with the dollar while Treasuries and swaps traded close to unchanged as markets digested the fallout from Friday’s horrific terrorist attacks in Paris.  After getting over the initial shock, a sense of normalcy restored to the markets as investors refocused on global growth prospects and the Fed.  Data was light globally with the exception of Japanese GDP which came in weaker than expected (-0.8% vs. -0.2%e annualized QoQ).  Japan’s economy is now in a technical recession following the second consecutive quarter of contraction.  Most of the weakness in the headline number...

November 13, 2015

Global Growth Concerns Weigh on Risk Assets

Stocks declined while Treasuries and swaps rallied off the back of renewed global growth concerns.  Eurozone GDP unexpectedly slowed to 0.3% in the third quarter, down from 0.4% in Q2.  Analysts were expecting a 0.4% rise, but the headline number was dragged down by weakness in Italy and Germany.  While the Eurozone has been out of recession for a while now, it's troubling that growth remains below expectations given how loose monetary policy has been in the region for years.  Money markets in Europeare essentially already pricing in additional easing from the ECB when it meets in December...

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