Market Watch

Week ending Friday 14th October 2016 Like clockwork, the overall tight money stance of the Fed led to a softening of data into October, following reasonably positive trends in September. Month to month data fluctuates but the trend stays the same. The Fed’s stance did come under scrutiny as various regional Presidents spoke out, some more influential than others, but culminated in the big cheese Chair Yellen causing a stir late on Friday with some new and interesting views. USD rallies to top of medium term range The big market story for most of the week was the strengthening USD… Read More

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Week ending Friday 7th October 2016 Last week we expected that the week would be full of good data and that money would tighten as a result of the market’s belief that it would encourage the Fed to actively tighten. And that is what, more or less, happened. Surveys mostly good, data mixed Surveys for manufacturing and for services in the early part of the week were stronger than expected or in line. Payrolls data at the end of the week were less good, but within them the income trends were a bit better than expected. USD modestly strong, EUR… Read More

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Week ending Friday 30th September 2016 Most financial markets traded in a tight range over the week. There was a general weakness in expectations in the first part of the week before a recovery at the end. Shares, bond yields drifted down before falls were reversed on Friday. A lot of the temporary angst was not about the state of the US economy or US politics, but about the state of Deutsche Bank. The backdrop of falling Base Money does provoke our concern and remind people of the Lehman failure in 2008. The possibility of dramatic moves in oil price… Read More

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Week ending Friday 23rd September 2016 It promised to be an eventful week with major committee meetings of monetary policy makers in Japan and the Us. After loads of speculation nothing really changed. Japanese monetary policy is still confusing and US monetary policy maintained its passive tightening bias but didn’t actively tighten. Markets barely moved over the week. There had been some legitimate worries in the market about a rate rise that had pushed up the probability a little, encouraged by hawkish regional Fed presidents and echoes of Stanley Fischer’s mischief-making plus “orders” from Jamie Dimon. As a result of… Read More

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Week ending Friday 16th September 2016 The week started with the markets pondering the state of mind of the FOMC via the very important speech of Fed BoG member Lael Brainard. The week ended with the market trying to ponder the mind of the Fed after a large batch of date releases: which ones will they look at, not look at, and how will they  interpret the numbers. Trump = Brexit, maybe Muddying the whole picture is the Presidential election. Clinton would most likely be a big yawn for policy while Trump would be exciting, scary even. A bit like… Read More

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Week ending Friday 9th September 2016 What is it about Fridays? The main market action always seems to be at the end of the week. Equities had a very bad day with the S&P falling 2.5% and bond yields continuing to rally hard. The USD roller-coasted as markets assumed monetary policy would be loosened after the bad PMIs. But that was before the idea was cruelly disabused by the FOMC hawks. The yield curve bizarrely steepened as the short end rose on higher near term rate rise expectations and the long end yields rose further due to oil-induced inflation fears… Read More

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Week ending Friday 2nd September 2016 Industry side surveys for August were poor, especially manufacturing. Services are harder to read, which is a problem given they are well over 80% of output! Consumer confidence stayed robust which fits with the employment numbers but not with the earnings trends. The Fed will probably not raise rates in the face of this mostly poor news and so markets remained quiet – not quite understanding, as ever, that the poor news is a consequence of the Fed tightening bias. What does the FOMC think? All different stuff There was very little central banker… Read More

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 Week ending Friday 26th August 2016 Markets had a largely directionless week until Friday and the big Jackson Hole symposium. New home sales had excited the market on Monday but by Wednesday pending home sales had heavily disappointed as had the many current month surveys. Triumph of hope over experience Hopes had been raised the week before by John Williams’ Economic Letter proposing some new thinking but then quickly dashed by William Dudley in an interview and by John Williams himself in a speech. Markets seemed to have picked up the vibe that nothing big would come from Jackson Hole… Read More

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Week ending Friday 19th August 2016 Data took a back seat to FOMC members and group statements. They appeared to be in conflict not only with each other, as in the FOMC Minutes released mid-week, but even with themselves. The USD has remained weak while bonds have been merely volatile, apart from the short end. Equities have remained near the highs, bolstered by a good recovery in oil prices. The most significant dichotomy has been the USD weakness versus higher 12m interest rate expectations – a superficially puzzling phenomenon but maybe explained by the current and upcoming debates within the… Read More

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