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September 25, 2015

Risk On Trade Back in Vogue After Hawkish Comments from Fed Chair Yellen

What a difference a day makes.  Global stock markets rebounded while Treasuries sold off across the curve after yesterday’s speech by Fed Chair Yellen boosted confidence in the US economy.  Most of her speech focused on the history of US inflation, but she caught everyone’s attention when she said “Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter”.  This clearly confirms that the FOMC believes it’s on track to...

September 24, 2015

Equities Decline While Treasuries Rally as Markets Eye Central Banks and Data

Global stock markets plunged while Treasuries rallied across the curve amid growing concern over the health of the global economy.  Central banks continue to dominate the headlines and influence market sentiment as investors attempt to interpret their actions (or lack thereof).  This morning the central banks of both Taiwan and Norway cut rates in an attempt to support economic growth.  Taiwan’s 12.5 basis point cut was the first in six years, but Norway’s 25 basis point cut was the bigger surprise, reducing its key rate to a record-low 0.75%.  This comes less than a week after the Federal...

September 23, 2015

Equities and Treasuries Both Decline On Light Volume as China and ECB Weigh

Stocks and Treasuries both sold off marginally as investors weighed a rally in commodity prices against weak global manufacturing data.  Volumes are light due to the Jewish holiday and Autumn Equinox in Japan, but there were a variety of economic releases for markets to digest.  Chinese manufacturing continued to disappoint, contracting at its fastest pace in 6 years, during the depths of the financial crisis.  The Caixin-Markit Flash PMI fell to 47.0 in September, down from 47.3% in August and below the 47.5 expected.  The components of the report were also weak, as output, new orders,...

September 22, 2015

Risk Assets Decline, Treasuries Rally on Global Growth Concerns

Risk assets fell while Treasuries rallied across the curve amid renewed concern over China’s growth prospects.  The Asian Development Bank cut its regional forecasts for this year and next, citing softer expected growth from both China and India, and a delayed recovery from the world’s advanced economies.  The ADB is now predicting growth in the region of 5.8% in 2015 and 6.0% in 2016, both down from previous estimates of 6.3%.  The ADB cut China’s growth forecast for 2015 to 6.8% from 7.2%.  Commodity prices were hit hard as a result, further cooling the global outlook for inflation....

September 21, 2015

Equities Rebound, Treasuries Sell Off As Markets Digest Hawkish Comments from Fed Officials

Equities opened the week higher while Treasuries sold off across the curve as investors refocused on the US domestic growth outlook following hawkish comments from Fed policymakers.  Over the weekend, three Fed officials argued that raising rates this year is very much still on the table, contradicting bets by many traders after last week’s FOMC announcement and press conference.  San Francisco Fed President Williams described the Fed’s decision as a “close call”.  He reiterated that increased concern over the global economy and financial system is what caused policymakers to err on the...

September 18, 2015

Equities Fall, Treasuries Rally in Fallout from Yesterday's FOMC Announcement

Equities and oil prices declined while Treasuries continued to rally following yesterday’s more dovish than expected FOMC.  The Fed decided to maintain its federal funds target rate at 0% to 0.25%, where it has been since December of 2008, citing global financial market volatility and sluggish inflation in the US.  During the post-meeting press conference, Fed Chair Yellen said the outlook for global growth has become less certain, and US financial market conditions have essentially already tightened due to the recent fall in stock prices and stronger dollar.  The committee acknowledged...

September 17, 2015

Equities and Treasuries Both Hover Close to Unchanged Ahead of Fed Decision

Today is all about the Fed with both US stocks and Treasuries trading close to unchanged in anticipation, seemingly ignoring a variety of economic releases.  The FOMC’s policy decision will be released at 2pm ET followed by Yellen’s press conference at 2:30pm.  The market-implied probably of a rate hike has decreased considerably since the Chinese devaluation of the yuan back in mid-August, but there hasn’t been a clear consensus from economists as to what the Fed will ultimately decide.  Domestic labor data continues to show strength, underscored by today’s jobless claims report, which is...

September 16, 2015

Equities and Treasuries Both Rally in Cautious Trading Ahead of Fed

US Stocks and Treasuries both rallied marginally ahead of tomorrow’s all-important Fed rate decision.  A Reuters poll taken over the last 24 hours surveyed 80 economists based in North America and Europe asking if they thought the Fed would hike rates tomorrow.  The number of economists predicting no change outnumbered those expecting a hike by a narrow margin (45 to 35).  In an identical survey last week, a little over half of economists predicted the Fed would in fact pull the trigger.  It’s unclear exactly what swayed their thinking over the past couple days, but it underscores just how...

September 15, 2015

Equities Rise With Oil, Treasury Prices Fall Off the Back of Positive Consumer Data Before Fed

Stocks rallied while Treasuries sold off across the curve after a mixed bag of US economic data.  Markets appeared to focus on the retail sales report in particular, which increased for a second straight month despite recent weakness in financial markets.  The 0.2% increase in August missed the 0.3% gain forecast by economists, but it followed an upwardly revised 0.7% jump in July.  10 of the major 13 categories of retailers experienced gains, led by auto dealers, restaurants, and clothing stores.  Data last week showed recent stock market volatility has weighed on consumer confidence, but...

September 14, 2015

Equities Decline, Treasuries Rally Marginally on China Data Ahead of FOMC

Stocks declined while Treasuries rallied marginally on light volume as investors digested largely disappointing Chinese data ahead of this week’s FOMC meeting.  Chinese industrial production and urban fixed asset investment (essentially infrastructure spending) both missed economist estimates, casting renewed doubts over China’s ability to reach its 7% growth target for the first time since the financial crisis.  Chinese IP grew 6.1% YoY vs. Wall Street estimates of 6.6%, while fixed asset investment slowed to 10.9% through August, the slowest pace in almost 15 years.  Retail sales,...

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