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My view on what's going on in the financial markets and the global economy, and a few other things that might interest me from time to time.

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  • tim@emorningcoffee.com

WEEKLY: Worse than expected on declining volumes

SUMMARY

Happy Christmas Eve for those that celebrate. I will use this time of year to say “thanks” to my readers who are nice enough to read my gibberish from time to time! Make sure you check out my article from this week on how bad strategists are on predicting future stock prices (here). Below is an abbreviated version of the weekly update given the season.


The major market-moving news items this week were:

  • Bank of Japan shocked markets, lifting the band on the 10y JGB from 0% to 0.25%, to 0.25% to 0.50% (see here). The Yen strengthened. Japanese bonds and equities sold off, with the Nikkei 225 down 4.7% WoW. There was contagion into other bond markets, too, with yields across the UST complex higher across the board.

  • Personal Consumption Expenditures (PCE), the Fed’s preferred inflation measure, slowed again in November, providing encouragement that inflation is indeed coming down slowly in the US. Here is the table extracted from the BEA report:


Although encouraging, the reads were in line with analysts’ expectations. Prior months were actually revised upwards.


  • Even though the PCE report provided slightly encouraging data, the University of Michigan Consumer Confidence Index (report here) suggested that consumer confidence rose in November. Remember – good news for the economy is bad news for inflation! Here is an extract from the consumer confidence report: “Consumer sentiment confirmed the preliminary reading earlier this month, rising 5% above November. Sentiment remains relatively downbeat at 15% below a year ago, but consumers’ extremely negative attitudes have softened this month on the basis of easing pressures from inflation.” One related thing I came across is a table showing monthly consumer sentiment by political party since 1980 (here). The pattern makes sense but I never focused on this before: the President’s party is generally more optimistic on the future than the other party. You can see this now, with Democrats currently feeling much better about the future than Republics, a rather depressed bunch at the moment.

MARKETS THIS WEEK

Below is a summary table of markets for this week. European equities were better, Asian equities the worst. US Treasuries lost ground, too.


WHAT’S NEXT?
  • Market holidays in the coming two weeks are Monday, December 26 (Christmas observed) in the US, the UK and Eurozone; Monday, January 2 (New Year’s observed+other) in the US, UK, Japan and China; December 27 (Boxing day observed) in the UK.

  • ·Upcoming central bank meetings:

  • Bank of Japan – Jan 17th-18th

  • Federal Reserve Jan 31st/Feb 1st and March 21st-22nd

  • Bank of England Feb 2nd and March 23rd

  • ECB – Feb 2nd and March 23rd

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