Weekly Assessments

Markets A lively week in US on the data front was somewhat matched by much action in the markets. The yield curve was perhaps the most interesting change. It flattened somewhat. There have been three or four data surprises over the last few weeks showing potentially higher than expected nominal growth in January: Average Hourly Earnings, nominal retail sales, core CPI and now core PCE. It’s only one month but it seems to fit a pattern. The US 12 month generic government 12m yield has now risen back up from a 44bps low hit after the poor December business outlook…...

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Markets Maybe because it was a four-day week in the US but equity markets were remarkably robust. The S&P500 consolidated its rebound from the bad early February news. The FOMC Minutes were a non-event as expected but a swing voter, Bullard, did turn more dovish. He swings a lot, to be honest, but at least he swings. Perhaps we’d score Bullard 2 out of 10 on a usefulness rating, but at least not negative. That said, there was no recovery from the sharp January set-backs to equities. This overall lethargy was seen in bond markets, TIPS and the US Dollar…...

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Markets Luckily we only write the weekly after all the “noise” has died down. And what a lot of noise. It turned out that the big event of the week was the Janet Yellen testimony before Congress, but she was merely as dour as expected. The evidence for her being “in line” was that US equity markets and shorter term bond yields fell as she testified before almost recovering back to where they closed the previous week. The S&P500 was down less than 1% and NASDAQ was flat. The damage to these indexes had occurred the previous week. The actual…...

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Markets Two weeks ago we were musing here about the whole “good news is bad news” meme, reflecting on the market crash that week as a “bad news is bad news” event. The Fed was set on tightening mode and the market thought it wouldn’t even be deflected by bad news, so bad news was really bad. On Friday the job creation was a bit worse than expected, the unemployment rate was a tick lower than expected and wage growth was stronger than expected, especially given the previous month’s growth rate had been revised up. The result was that the…...

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Markets The equity markets continued their modest recovery triggered the previous week by European central bankers. It gathered pace on Friday with a potentially end-of-the-month technical rally. Short-covering? Probably. What was clear is that the great “China is causing global turmoil story” proved a bit of a head-fake. The Chinese stock markets fell heavily but the rest of the world ignored them. The trickiest potential hurdle for equities was the FOMC meeting. It proved a damp squib: target rate held at 0.50% The Fed showed enough of a reaction to Fed-induced market turmoil to prevent further Fed-induced turmoil. Well done.…...

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Benjamin Cole/Jan 29, 2016 And so the Bank of Japan becomes the latest monetary policy-making body to introduce negative interest rates, in what has been a years-long yet curiously feeble battle by global central bankers to avoid sluggish growth, recession and deflation. From CNBC: “The Bank of Japan adopted negative interest rates for the first time at the end of its two-day policy review on Friday, buckling under pressure to ease concerns about the health of the world’s third-largest economy. [T]he BOJ said it will apply a rate of negative 0.1% to excess reserves that financial institutional place at the…...

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Markets The equity markets fall from the previous week gathered pace until non-US central bankers raised their heads and promised action. As expected by Market Monetarists, markets rallied at that point. The power of expectations is awful to behold, especially at turning points. Financial market participants often use the cliché that “bad news is good news”. This very often refers to the phenomenon when bad economic news is interpreted by markets as meaning central banks are likely to ease monetary policy. It usually leads to flat, directionless, stock markets. Things look best when “good is news is good news”. For…...

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