Nov 29, 2018, by Lorcan Roche Kelly
Markets see a dove
Two words from Federal Reserve Chairman Jerome Powell yesterday turned markets around. When he said interest rates are “just below” estimates of the so-called neutral level, investors viewed that as a signal there would be fewer rate hikes in 2019, and reacted accordingly. Add some disappointing European survey data – which is likely to slow any European Central Bank tightening – to the mix, and we have a recipe for a bond rally across developed-market sovereigns.
Oil under $50
A barrel of West Texas Intermediate for January delivery dropped below $50 for the first time in a year in trading this morning, and was at $49.88 by 5:45 a.m. Eastern Time. Russian leader Vladimir Putin yesterday said that current crude prices suit his country just fine ahead of a meeting with Saudi Arabia’s Mohammed bin Salman at this weekend’s G-20 meeting in Argentina. Adding to pressure on crude is continuing production increases from both the Saudis and U.S. shale companies, with American stockpiles now increasing for 10 weeks in a row.
Prosecutors in Frankfurt raided the headquarters of Deutsche Bank AG this morning as part of an investigation into money laundering arising from the Panama Papers. Shares of the bank tumbled as much as 4.7 percent after the news broke and were trading 3.7 percent lower by 5:45 a.m. This latest legal problem adds to the bank’s legacy of legal woes which has seen it pay billions in fines and settlements since the start of 2008.
Overnight, the MSCI Asia Pacific Index added 0.7 percent while Japan’s Topix index closed 0.4 percent higher as the region’s markets were lifted by the Powell-driven sentiment change. In Europe, the Stoxx 600 Index was 0.3 percent higher at 5:45 a.m. as the gauge held its gains despite the selloff in Deutsche Bank and the drop in crude. S&P 500 futures pointed to a lower open, the 10-year Treasury yield was at 3.010 percent and gold was higher.
There’s a bit of a data dump coming at 8:30 a.m. with initial jobless claims, the October PCE report, personal income and personal spending data all landing. To add to the noise, Fed Chair Powell is due to address students at the College Fed Challenge Finals at the same time. At 10:00 a.m., October pending home-sales numbers are released. 2:00 p.m. sees the release of the latest Fed minutes. It’s also the start of a conference at the Boston Fed that features as speakers regional presidents from Cleveland, Chicago, Philadelphia, Minneapolis, Dallas, and of course Boston.