PBoC Rate Cuts Supercharge Global Markets

Economic Data

- (IE) Ireland Oct PPI M/M: 0.5% v 1.2% prior; Y/Y: +0.3% v -0.6% prior
- (EU) ECB: 18 banks to repay total €8.5B in 3-Year LTRO Funds vs. €3.5Be
- (RU) Russia Oct Real Retail Sales M/M: 2.3% v 1.9%e; Y/Y: 1.7% v 1.2%e
- (RU) Russia Oct Unemployment Rate: 5.1% v 5.1%e
- (CA) Canada Oct CPI M/M: +0.1% v -0.2%e; Y/Y: 2.3% v 2.1%e
- (CA) Canada Oct CPI Core M/M: 0.3% v 0.2%e; Y/Y: 2.3% v 2.1%e
- (MX) Mexico Q3 GDP Q/Q: 0.5% v 0.6%e; Y/Y: 2.2% v 2.3%e
- (US) Nov Kansas City Fed Manufacturing Activity: 7 v 6e

Global markets have rocked higher this morning thanks to China's PBoC and its surprise rate cut. The DJIA and the S&P500 notched fresh record highs right after the open of cash trading and remain pretty well bid, but off their highs. As of writing, the DJIA is up 0.63%, the S&P500 is up 0.66% and the Nasdaq is up 0.45%.

The biggest equity beneficiaries of the Chinese cuts are in the materials segment, including miners and equipment manufacturers. Iron ore names have taken a beating over recent months, and both VALE and CLF were up more than 9% at their best levels in cash trading. BHP and FCX are up just shy of 5% a piece, and CAT is up 4%. Gold and crude are also rocking higher, with spot gold up more than 2% since the announcement and back above $1,200 for the first time in three weeks, while WTI crude nearly took out $78 before retracing some of its gains.

The ECB initiated ABS purchases this morning. A speech by ECB President Draghi was also being widely discussed. During the European session, Draghi said the ECB would "do what we must to raise inflation and inflation expectations as fast as possible." Draghi said he fears low inflation could percolate through the economy and worsen the economic situation. EUR/USD fell off a cliff after his speech and bottomed out this morning around 1.2400.

The EPA announced this morning that it would not finalize its 2014 renewable fuel standards, which are now about one year late. Press reports suggested that the agency would waive the requirements for 2014 altogether or accept whatever has been produced as meeting the mandate. Renewable fuel names ADM, GPRE and PEIX have been knocked around a bit on the news.

Among the biggest losers is GameStop, with shares of GME down more than 13%. EPS and revenue slightly missed expectations and the company dialed its FY guidance way back, including a dismal miss on fourth quarter guidance. Gap Inc also delivered pretty terrible third quarter results and cut its FY view, with shares of GPS down 6%.

Looking Ahead

- Ratings agencies to publish Netherlands, Estonia, Denmark, Greece and Portugal sovereign debt ratings
- 14:00 (AR) Argentina Sept Economic Activity Index (Monthly GDP) M/M: No est v -0.7% prior; Y/Y: -0.7%e v -1.2% prior
- 14:45 (UK) BOE's Miles at economic conference in Bristol, England

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