18 December 2014
# NZ Q3 GDP
# RBA Bulletin
# UK Retail Sales
# U.S. Weekly Unemployment Claims
# U.S. Flash Services PMI
# U.S. Philly Fed Manufacturing Index.
# European stocks were little changed, erasing earlier losses, as gains in commodity producers and energy companies offset a decline in banks. The stable close belies the continuation of recent volatility with the Stoxx down as much as 1.1% earlier before closing up 0.14%. Across the Atlantic U.S. bourses very much enjoyed the Fed and its FOMC communique this morning. The initial reaction is that the Fed is still there in its supportive capacity for the market and a such today’s gains were amongst the best of the year. Volatility was extreme the S&P500 was up 2% early, before erasing all the gains straight after the fed then returning to close up 2.03%. Exhausting stuff indeed and the imminent holidays seem very appealing right now.
# The FOMC statement keep ‘considerable time’ but in a slightly different capacity. Indeed the way the statement was phrased had some in the market speculating that it was intended to confuse the algorithms that troll the markets. That is rubbish in our opinion but the thinking goes to the wild swings we saw in the direct aftermath. The committee said that they “could be patient in any normalisation”….which is consistent to a considerable time)…...the phrase you’re removing when you’re not removing phrase huh? Probably the most telling moment came in the press conference when Yellen said that ‘patient’ meant that “not raising in the next two meetings (March & April)”……which left it open a hike immediately thereafter ? Very confusing stuff indeed.
# During the conference Yellen opined the Crude price drop of recent months was a net positive for the U.S. and essentially a tax cut for consumers.
# Regarding Crude, WTI rallied sharply on no new bullish news, indeed what news there was, was at the margin, bearish with supplies at Cushing actually rising. Thus the perception that the drop had come far enough for now saw WTI for January delivery rise 54 cents, or 1%, to end at $56.47 a barrel. Prices had dropped to $53.60 yesterday, the lowest since May 2009.
# ECB board member Coeure added to the full European QE debate saying “not that much of a question on whether we should do something but more a discussion on the best way to do it”. The EUR/USD was weaker as a result.
# U.S inflation fell in November at the steepest rate in almost 6 years, heading lower due to sliding crude prices. The CPI fell a seasonally adjusted 0.3% from October. That marked the biggest one-month drop since December 2008, when the U.S. was in recession. Prices outside of oil rose modestly, suggesting that underlying inflation is tame. Excluding food and energy costs, so-called core prices rose 0.1%. Overall prices (headline CPI) have risen 1.3% over the past year and core prices (ex food and energy) have climbed 1.7%. Hardly supportive of the USD and rate raises just yet.