Market Watch

Markets – equities begin to get it> Last week we suggested that US bonds were “getting it” and equities were too optimistic. Well, this week bond yields continued to fall and equities began to “get it” too. Nominal growth is poor and it’s not good news. The key data point of the week were the two surveys of the services sector for March. Both showed a weak rebound from a run of very weak readings. Even if slightly ahead of expectations they painted a very dull picture for 80% of the economy. “Slightly better news as neutral news”. Bond yields… Read More

Share

Markets – US equities versus bonds It’s been good for US equities as the S&P has further consolidated its post-March FOMC meeting bounce. Apparent monetary dovishness has boosted confidence. The US$ has also weakened back to the lower end of its recent trading range and equities in particular like that. The confidence in equities is something of a contrast with the bond markets. They don’t see the dovishness from the FOMC as that bullish. Tuesday saw a big hit to shorter term rate expectations due to weaker than expected PCE Price Inflation, especially the famous Core PCE PI. Plus we… Read More

Share

Markets – weak An Easter shortened week turned out quite dull. US equities drifted off the recent highs, as surveys of March activity came in weak and a bunch of less important, mostly non-voting, regional Fed governors complained about the dovish outcome of the March meeting. Tough. Goldman Sachs is still reeling from its wrong call about rates and has now doubled down, and started campaigning for higher rates. It seems silly but they are known to be influential with the Fed and so it is actually a tightening of monetary policy when Goldman’s come out all hawkish. US rates… Read More

Share

Markets The S&P500 rose 1% over the week. All of the rise came after the unexpectedly dovish FOMC statement and Yellen press conference. The move up in equities built on the ECB good news/US$ weakness from the previous week, and the shrugging of bad economic news. We really seem to be in a “bad news is good news” phase at the moment as the Fed tightening seemingly has been put on hold whatever the data says, either worse than expected fundamental data or higher than expected inflation news. Any good economic news should thus be taken very well by markets.… Read More

Share

Markets It seemed like a highly volatile week in markets, but was it really? The high drama of the ECB monetary policy decision, press conference and post-conference damage-control turned out to be not so noticeable on a longer term view, at least in the US. There is a lot of information in price moves to unexpected news, but perspective is also important to use markets to see where the economy is heading in the medium term. Take currencies: the Euro rose sharply over the week, almost all of it during the botched Draghi press conference (as in the left hand… Read More

Share

Markets The rebound in the oil price and in emerging markets dominated the week’s news. The spark may well have been William Dudley, the third most important Fed member, expressing newly cautious outlook on growth, inflation and financial market confidence. It meant both bad and good news on the data front could be taken as good news. We had expected the market to be dull at the start of the week following the stronger than expected inflation data being thought to drive the data-driven Fed. And on Monday this seemed to be occurring until up popped Dudley overnight on Monday… Read More

Share

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… Read More

Share

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… Read More

Share

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… Read More

Share

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… Read More

Share