3 December 2014
# Australian Q3 GDP
# China Non-manufacturing PMI
# China HSBC Services PMI
# European Services PMI’s
# Eurozone Retail Sales
# U.S. ADP Non-farm Employment Change
# U.S. Services PMI
# U.S. ISM Non-manufacturing PMI
# U.S. Beige Book
# A bounce in energy stocks, the sector rallying 1.7%, sent the overall Stoxx600 to a 0.50% gain. The rally came amidst comments from IMF Managing Director Christine Lagarde who said that lower oil prices were a positive for the global economy. A more broad based rally was seen on the U.S. bourses with 9 of the 10 S&P 500 industry sectors higher, with the telecom sector bucking the trend. Again energy stocks led the way despite a moderate fall in crude prices on the day. The S&P500 is up 0.71% with an hour of trade left. The Dow has eked out yet another intraday high, just.
# The NZD/USD was the worst performing of the G-10 currency set as the USD put in a broad rally. The ‘kiwis’ fate was set with yet another GDT auction price decline. Whole milk powder prices continued to decline while other products showed signs of improvement. Anhydrous milk fat prices improved by 9 %, butter by 7.3 %, butter milk powder by 8.8 %, cheddar by 5.2%, rennet casein by 9.3% and skim milk powder by 5.7%. However it was whole milk powder, the most important product group for New Zealand producers, which dropped by a significant 7.1% from the last sale to US$2229 a tonne, a 5 year low.
# U.S. treasury yields rose for a 2nd day after steep declines last week. A combination of factors were in play including better risk sentiment on the back of the equity market rally and a large pending bond issue of $6 bln from Amazon. The 10 year note yields 2.28% from 2.23% yesterday.
# The Fed’s 2IC Fischer opined that any stirring of U.S. inflation would naturally lead to rate rises given unemployment was trending lower however he was also at pains to point out that if inflation heads lower Fed will keep rates near zero. The hawkish side of the comments seem to have been widely embraced. He also went on to say that the Fed should not get involved in managing every perceived asset-price “bubble” unless it threatened to have major consequences for the whole economy. Otherwise “the market should correct it”. Interesting comments given much has been made of the ‘reach for yield’ in recent years amidst a low rate environment where corporate ‘junk’ bonds and indeed some sovereign bonds are widely seen as overvalued.
# Saudi Arabia’s Prince Turki said Saudi Arabia would consider output cut if others, including non-OPEC countries like Russia join in.
# A seemingly inexorable global move to better policing of tax jurisdictions is underway with China now also toughening its stance on tax avoidance. The country will closely monitor the profit levels of foreign firms to ensure companies do not shift profits to other regions where taxes are lower, reports the Xinhua news agency. The announcement follows Beijing's requirement for Microsoft to pay $140M in back taxes last week.