tock markets in North America and Europe had a positive day today as traders speculated that easy monetary policies may be here to stay for some time. USD dropped back as December tapering speculation went the way of the dodo bird with more Fed members suggesting this week that FOMC moves remain dependent on data meaning that things aren’t good enough to take action yet. In addition, a reminder from Cleveland Fed Governor Pianalto, a non-voting hawk who is leaving the Fed, that tapering is not the same thing as tightening, boosted the bullish cause.
With the greenback resuming its downtrend on anticipation of continuing QE a number of markets rebounded, particularly crude oil and gasoline which had sold off lately and become quite depressed. The energy group also received a boost from better than expected inventories. Gold and silver also capitalized on the falling USD to a lesser extent.
A Goldilocks scenario of an economy strong enough to support solid corporate earnings but weak enough to keep Fed hawks at bay sent QE fuelled US indices like the Dow to a new all-time high today. The NASDAQ, however fell after being dragged down by a big selloff (14% drop) in Tesla Motors after the automaker disappointed on guidance on encountering production limitations.
FX markets saw significant action today. NZD led the charge on the back of strong employment numbers that could keep the RBNZ hawkish and looking to raise rates next year. EUR rebounded as some of the speculation surrounding an ECB rate cut eased. GBP rallied as industrial production confirmed strong PMI numbers that indicate the UK economic acceleration continued into the autumn which could bring the BoE closer to its own tapering. CAD picked up on the back of very strong Canadian PMI. Defensives CHF and JPY have fallen to the bottom of the group, which may also explain gold’s lacklustre rebound.
The next 48 hours could potentially be very active for markets. Momentum has been positive heading into today’s Asia Pacific session and Australian markets (Aussie 200 and AUD) could be active today on today’s employment report.
The potential for big news and market action continues into European trading and the two main central bank meetings. The ECB decision could spark activity as either those calling for no cut or any people still speculating on a rate cut may be caught offside and may have to quickly exit positions. Speculation about a rate cut had driven EUR down sharply last week and even with today’s bounce remains well short of where it was trading before speculation started last week.
Moving into the US session, Twitter’s trading debut takes centre stage. We have been waiting for it but at the time of writing, the IPO price has not been announced. It had been rumoured through the day that it could come in above the $23.00-$25.00 range which had already been moved up from the initial $17.00-$20.00 zone.
The week isn’t over by a long shot either. Friday brings US nonfarm payrolls which could stoke or slam the door on December tapering speculation. The weekend brings economic numbers from China and the potential for significant reform announcements.
Qualcomm $1.05 vs street $1.09, guidance $1.10-$1.20 vs street $1.29
Activision Blizzard $0.08 vs street $0.03, cut guidance to $0.72 from $0.76-$0.79
Whole Foods $0.32 vs street $0.31, cut FY guidance to $1.65-$1.69 from $1.69 to $1.72
Highlights of overnight announcements include:
Service PMI reports include:
Spain 49.6 vs street 49.0
Italy 50.5 vs street 51.2
France 50.9 vs street 50.2
Germany 52.9 vs street 52.3
Eurozone 51.9 vs street 51.5
Other reports include:
Canada PMI 62.8 vs street 52.0
US leading index 0.7% vs street 0.6%
US crude oil inventories 1.5 mmbbls vs street 2.1 mmbbls
US gasoline inventories (4.8 mmbbls) vs street (0.4 mmbbls)
US Challenger layoffs 45K vs previous 40K
Poland interest rate decision 2.50% no change as expected
UK Halifax house prices 6.9% vs street 7.0%
UK industrial production 2.2% vs street 1.8%
UK manufacturing production 0.8% as expected
Eurozone retail sales 0.3% vs street 0.6%
UK NIESR GDP estimate 0.7% vs previous 0.8%
Upcoming significant announcements include:
11:30 am AEST Australia employment change street 10K
11:30 am AEST Australia unemployment rate street 5.7%
11:30 am AEST Australia full-time jobs previous 5K
11:30 am AEST Australia part-time jobs previous 4K
11:00 am GMT Germany industrial production street 0.8%
12:00 pm GMT UK interest rate decision 0.50% no change expected
12:00 pm GMT UK QE decision £375B no change expected
12:45 pm GMT ECB interest rate decision 0.50% no change expected but cut had been rumoured
8:30 am EDT US Q3 GDP street 2.0% vs previous 2.5%
8:30 am EDT US jobless claims street 335K
10:00 am EDT US natural gas storage street 36 BCF