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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...

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...

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