Market movers today

  • The German IFO expectations are due for release and we look for another positive surprise. In line with the ZEW expectations the IFO expectations bottomed in October and if the latest development in ZEW expectations is anything to go by, today’s IFO expectations should show an increase to the highest level since summer.

  • UK retail sales should increase again in November after showing some weakness in H2. We expect global private consumption to increase as it is boosted by lower energy costs due to the drop in the oil price.

  • US initial jobless claims are expected to remain broadly unchanged at the current low level. On the other hand, continuing jobless claims are expected to decline again after a jump last week, which might have been due to bad weather.

  • Russia's president Putin will hold his annual official press conference. From a market perspective focus will be on comments regarding the recent market turmoil and the sharp drop in the value of the rouble and the markets will be looking for hints on any possible market action. The biggest concern would be hints on currency controls and on whether Putin will blame the EU and the US for the recent market turmoil.


Selected market news

Yesterday the FOMC changed its key forward guidance phrase from ‘it likely will be appropriate to maintain the 0 to ¼ percent target range for the federal funds rate for a considerable time’ to ‘Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy’. Importantly, the rephrasing does not imply a change in Fed monetary policy. Indeed, in the following press conference chair Janet Yellen explained that the reason for the change of words was to decouple Fed communication from the language used to signal the end of QE. Yellen also emphasised that the first Fed hike is still very much data dependent and that the committee – in light of the current projections - does not expect an interest-rate liftoff in the ‘next couple of meetings’. Noteworthy, the Committee did not seem overly concerned about the recent financial turmoil and comments on current inflation were somewhat relaxed and balanced. In sum, the FOMC statement and Yellen’s comments were slightly more hawkish than market expectations. With yesterday’s FOMC comments and the recent strong data out of the US in mind, we still believe that the FOMC will hike the federal funds rate in June 2015 from the current historical low.

Wednesday saw another volatile session in the oil market. The price for Brent crude oil dropped below USD59/bbl before momentarily rebounding above USD62/bbl. Uncertainty prevails in the oil market but the support around the USD60/bbl may be a first indication that the sell-off is beginning to lose steam as the low price is painful to oil producers. Deputy prime minister of Iraq, Rowsch Shaways, yesterday said that the country may need to reconsider its ambitious plans to boost production the coming years on the back of the lower price.

In New Zealand Q3 GDP figures surprised to the upside at 1.0 % q/q SA.

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