News & Views: Thursday, October 30
What you need to know for today's trading day.
OPEC Head Tells Oil Market to Stop Panicking About Prices (Bloomberg)
Dollar surges as Fed ends QE on hawkish note (Reuters)
China Eases Monopoly on Handling of Credit-Card Payments (WSJ)
Russia Seen Sticking to 2015 Free Float Amid Ruble Rout (Bloomberg)
U.S.-based stock funds attract biggest weekly inflows since Feb. - ICI (Reuters)
Although the weakness in Europe may be the first thing your eyes see, note the strength in the Russian Ruble, which is showing the largest positive risk-adjusted return across all assets overnight and its largest absolute gain versus the US dollar since May 2003. The central bank of Russia announced this morning that they had sold ~$3.5bln in FX yesterday and raised the ruble band by 40 kopeks (40 cents) today. The move started today at about 6am ET and coincides with a report that Bashneft, one of the country's largest oil & gas exploration and production company, was being 38% nationalized by the government. There is also heavy speculation that the central bank will allow the currency to free float next year and increase rates by 150bps at its meeting tomorrow.
Peripheral European equities and European bank credit are showing the largest negative risk-adjusted returns in their respective asset classes overnight. That includes Germany, Spain, and Italy. The worst performer in all of Europe is Greece, which is down 4.46% in today's session, or the equivalent of two standard deviations away from its mean. Greek sovereign bonds had been a key cause for concern for global risk assets in the leg lower earlier in the month, and there hadn't been that much improvement since then. Now we're headed back towards those lows again.
Commodities are also very weak overnight in sympathy to the higher dollar, and crude oil is reversing its gains. The trade unwinds from yesterday's FOMC meeting will likely last into Monday as the inflation trade takes a backseat. The Treasury curve is flattening (5/30's flatter by 4bps), the dollar is rising, equities will fall with financials outperforming, and commodities will decline. Gold is showing the largest negative risk-adjusted return across all commodities.
German preliminary CPI at 9am ET. Yellen will also be speaking at the "Diversity of Economics Summit" in a prepared text and will not take questions. It is not the greatest venue to make any comments about monetary policy.
- German unemployment change (Oct) down 22K vs +4K expected, prior 9K
- German unemployment rate unchanged at 6.7% vs 6.7% exp, prior 6.7%
- UK home prices MoM (Oct) up 0.5% vs 0.3% exp, prior -0.1%
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