Posted on September 16, 2014 by Sam Wardwell
Last week in the capital markets: Bonds sold off globally in the week before the Fed meeting.
It was a quiet week for economic news, and the geopolitical front was relatively quiet (less fighting but more sanctions in Europe, moving toward a bigger effort against ISIS) but fears that the Fed is behind the curve seemed to be the ones that led investors and traders to act last week. Continue reading
Filed under: ECB, Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Inflation, Macroeconomics, Sam Wardwell, U.S. Dollar, United States | Tagged: Bonds, Capital Markets, currencies, ECB, emerging markets, Fed Action, inflation, Interest rates, Sam Wardwell, US GDP | Leave a comment »
Posted on September 8, 2014 by Sam Wardwell
Concerns about the Ukraine and Islamic State remained high last week, but diminished at week-end on news of a cease-fire in Ukraine and NATO resolve to address the Islamic State. The European Central Bank (ECB) surprised markets (bullishly), and U.S. economic news was biased to the positive.
Filed under: Equity Market Insights, Fixed Income Market Insights, GDP, Macroeconomics, Sam Wardwell, U.S. Dollar | Tagged: Capital Markets, currencies, ECB, Europe, Fed policy, Sam Wardwell, Ukraine | Leave a comment »
Posted on August 18, 2014 by Sam Wardwell
Last week’s data provided a mixed picture of the economy. Businesses produced more, but demand growth was soft. That combination suggests slower future economic growth, not acceleration (but still growth, not recession). Some points to note:
- The NFIB Small Business Optimism Index ticked up from 95.0 to 95.7.
- The Empire State (NY Fed) Index slipped, but remains strong at 14.7.
- Industrial production rose, led by auto production, and capacity utilization ticked up slightly as well.
- Business inventories rose modestly…slightly faster than sales.
- Consumer confidence slipped, despite good job market data…too many war/conflict/disease stories in the paper? That said, retail sales managed a 0.2% increase month over month (m/m) – still below expectations.
- Mortgage applications ticked down week over week (w/w); the generic rate dropped to 4.24%.
- Inflation remains comfortably below trigger levels for Fed tightening
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, Inflation, Macroeconomics, Sam Wardwell, United States | Tagged: Capital Markets, Europe, Sam Wardwell, the Fed, US GDP | Leave a comment »
Posted on August 4, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended August 1, 2014
The FOMC met last week, expressed satisfaction and maintained course. While their policy decisions (continue the taper—now $25b—and keep the Fed Funds rate where it is) were no surprise, the language of the Fed statement was tweaked to reflect the continued/continuing improvement in the economy and labor markets (e.g.: “the likelihood of inflation running persistently below 2% has diminished somewhat”). The Fed feels it is accomplishing its goal…so a continuation of policy normalization is appropriate.
At the same time, the Fed statement said “…a range of labor market indicators suggests that there remains significant underutilization of labor resources.” Analysis: the Yellen Fed is moving cautiously…with Japan and Europe still weak, the Fed appears willing to risk an inflationary boom in the U.S. to minimize the likelihood of having to fight a recession and/or deflation when it has a bloated balance sheet and low Fed Funds rate, but very robust tools to fight inflation. As I said on CNBC last week, a submarine commander doesn’t give the order to submerge when most of the hatches are closed.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Sam Wardwell, Uncategorized | Tagged: China, economy, Japan, labor market, Sam Wardwell, the Fed, Tipping Point, US GDP, Yellen's Fed | Leave a comment »
Posted on July 28, 2014 by Sam Wardwell
The Yellen Fed is wary of tightening too soon. It wants to see significant improvement in labor markets. (We’re seeing it.) It also wants to see evidence that U.S. inflation has formed a bottom. This precondition for a tighter Fed policy is also being fulfilled – CPI inflation has been steady and slow…but not slowing.
U.S. Economic Activity Looks Good
- Initial unemployment claims dropped to 284k, the first reading this cycle below 300k and the lowest since early 2006. These are boom-time readings, not recovering economy readings.
- CPI came in at 2.1% y/y; Core was 1.9%.
- About 200 S&P 500 companies have reported so far; more than 70% (slightly better than average) have beaten consensus.
- The Chicago Fed National Activity Index, a gauge of economic activity, was slightly above-trend.
- The Markit U.S. manufacturing PMI softened a bit, to 56.3…still strong (50 is break-even).
- The Richmond Fed’s manufacturing index (zero is break-even) rose from 4 to 7–solid; hiring was notably strong.
- The Kansas City Fed manufacturing index rose from 6 to 9, lifted by durable goods producers and employment. Rising quit rates particularly among machinists and welders were cited.
Filed under: Equity Market Insights, Europe, GDP, Macroeconomics, Sam Wardwell | Tagged: Europe, inflation, Japan, QE Tapering, Sam Wardwell, SEC Money Market Rules, the Fed | Leave a comment »
Posted on July 14, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended July 11, 2014
It was a tough week for Europe over all last week – industrial production declined in Germany, Italy, France, and the UK, with the details broadly downbeat. Trade (import and export) data, especially from Germany, was disappointing as well. But the big story in Europe last week came from Portugal, where Banco Espírito Santo (BES), a leading Portuguese bank, suffered a share price crash and trading was suspended after reports of financial irregularities.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, Inflation, Macroeconomics, Sam Wardwell | Tagged: Banco Espirito, Capital Markets, consumer spending, labor market, Sam Wardwell, the Fed, Unemployment | Leave a comment »
Posted on July 7, 2014 by Sam Wardwell
It’s not surprising that World Cup Syndrome has historically been responsible for lower office productivity around the world – in fact, you may have seen the telling chart created by Bloomberg, which uses European Central Bank (ECB) data to track dips in trading volume during games in the 2010 World Cup.
Perhaps ‘WCS’ is owed a nod for last week’s drop in ISIS (Islamic State) activity? The so-called Group of Death (Syria, Iran, Iraq, and the caliphate formerly known as ISIS) was very quiet last week.
- ISIS renamed itself the Islamist State and said it was a caliphate.
- Iraq’s parliament appears frozen, with Sunni, Kurdish, and Shiite factions apparently unable to strike a deal.
- It appears that the Islamist State gained ground…but oil traders don’t seem worried.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, Macroeconomics, Sam Wardwell | Tagged: Capital Markets, Central Banks, ECB, Europe, Sam Wardwell, World Cup, World Cup Syndrome | Leave a comment »