16 December 2014
# RBA Assist. Gov. Debelle speaks
# Australia Monetary Policy Meeting Minutes
# China HSBC Flash Manufacturing PMI
# European Flash Manufacturing PMI
# BOE Gov. Carney speaks
# UK CPI
# German ZEW Economic Sentiment
# U.S. Building Permits
# U.S. Housing Starts
# Fonterra GDT Auction
# Early gains evaporated and turned to sharp losses in Europe as the shakeout in crude prices resumed. The EuroStoxx600 was on target to post its first gains in 6 sessions before the rout resumed and in the end the Stoxx ended down by another significant degree, 2.18%. The story was a similar one stateside where early broad gains were seen prior to midday before a sharp move lower. Moving towards the close the main bourses are paring back from the lows to only be moderately down, the S&P down 0.37% with 20 minutes to go. U.S. economic data was mixed and once again it remains all about crude right now.
# The Federal Reserve’s Empire State manufacturing survey came in as a huge negative surprise, contracting for the first time in 2 years. The general business conditions index fell to -3.58 in December from November's 10.16 reading, falling into negative territory for the first time since January 2013. Economists polled had expected a reading of 12.4 this month. All sub-indexes slipped (no surprise with a reading like that) with even the recent bright spot of employment easing. This survey is one of the earliest monthly guides to U.S. factory conditions and whilst many in the market are prepared to overlook such an outlier figure for now, we suspect the survey is a lead to softer data outcomes going forward.
# Contradicting the Empire State report was U.S. industrial production which posted its biggest increase in 9 months in November as production expanded across the board. Factory production increased 1.1% after an upwardly revised 0.4% advance in October. The data may be distorted somewhat by utilities production which jumped by 5.1% in response to the unseasonable cold snap.
# The Russian ruble sank an incredible 13% against the dollar as oil prices resumed their selloff, and after reports that the U.S. is preparing new sanctions against Russia over its role in the crisis in Ukraine. The dollar hit record highs, buying 63.009 rubles compared with 58.204 on Friday, not finding any lasting relief from market intervention by the Russia’s central bank. Since July the Russian currency has halved in value against the dollar and the degree of pain for Russia begs the question “how will a cornered Putin react?”
# Crude traced out an wild 6%+ range to start the week. An early Asian 2% selloff was reversed for a 4% rally before the United Arab Emirates overnight said OPEC won’t rein in production in response to the slump. The comments saw a 6.1% decline take hold and crude sits on its new 5 year lows of US$55.20 going into the close . OPEC have pumped more than its output target of 30 million barrels a day for the last six months sending conspiracy theorists into a spin that the powerful cartel are attempting to make the U.S. frackers uneconomic.