Global markets have held steady in reaction to the worst attack on French soil since WWII. Despite immediate reactions such as a jump in oil prices due to concerns that the terrorist attack will impact the Middle East conflict, affecting global oil supply, by and large market participants have sent the message that they don’t think the event will have significant economic impact. Read more about More Than Prestige 11-18-15
A strong October jobs report has shifted market expectations for Fed action. The Fed Funds futures market, in which futures traders bet on the likelihood of changes in the federal funds rate, now assigns a 68 percent probability of higher rates come the next Federal Open Market Committee (FOMC) confab in mid December. Read more about China Data Revals Dichotomy 11-11-15
Fed Chair Janet Yellen testified before the House Financial Services Committee today, telling lawmakers her latest views. She described a December interest rate increase as a “live possibility.” As always, in what we have come to see by now as well-established Fed tradition, she also qualified her remarks by noting that the decision would continue to depend on economic cooperation. Read more about Yellen Repeats the Fed Mantra 11-04-15
Oil enjoyed a strong day, with West Texas Intermediate rallying to close at nearly $46, for a 6.3 percent gain on the day. The weekly Energy Information Administration (EIA) petroleum report showed that commercial crude inventory rose again but by less than expected. Meanwhile, gasoline and distillate fuel inventories decreased by 1.1 million barrels and 3 million barrels, respectively, which suggests a pickup in demand for the processed products. Read more about Fed Strikes Hawkish Tone 10-28-15
In Vienna, this week representatives OPEC and 5 non-OPEC nations (Mexico, Russia, Colombia, Kazakhstan and Brazil) convene a special meeting to discuss the oil market. However, it appears unlikely that any meaningful collaboration will result.
OPEC member Venezuela, whose economy has been crushed due to the oil crash, has pushed hard for this meeting and desperately wants the oil producers to agree to collectively curb output and to set a target price (Venezuela wants $88), but each of the OPEC countries has its own agenda. Read more about Vienna Meeting Underwhelms 10-21-15
The likelihood of higher interest rates before yearend became smaller.
This morning we saw the release of two important pieces of economic data. The U.S. Commerce Department reported that in September retail sales increased 0.1 percent from the previous month, below expectations. However, excluding auto, retail sales fell by 0.3 percent, below estimates of a 0.1 percent decline. In essence, only strong auto sales prevented the overall September data from being terrible. Read more about More Reasons to Wait 10-14-15