QE Is Dead, Long Live the Fed

Economic Data

- (EU) Euro Zone Oct Business Climate Indicator: 0.05 v 0.05e; Consumer Confidence: -11.1 v -11.1e; Economic Confidence: 100.7 v 99.7e; Industrial Confidence: -5.1 v -5.5e; Services Confidence: 4.4 v 3.1e
- (DE) Germany Oct CPI Baden Wuerttemberg M/M: -0.2 v 0.0% prior; Y/Y: 0.8 v 0.8% prior
- (US) Q3 Advance GDP Annualized Q/Q: 3.5% v 3.0%e; Personal Consumption: 1.8% v 1.9%e
- (US) Q3 Advance GDP Price Index: 1.3% v 1.4%e; Core PCE Q/Q: 1.4% v 1.4%e
- (US) Initial Jobless Claims: 287K v 285Ke; Continuing Claims: 3.384M v 2.35Me
- (DE) Germany Oct Preliminary CPI M/M: -0.3% v -0.1%e; Y/Y: 0.8% v 0.9%e
- (DE) Germany Oct Preliminary CPI Harmonized M/M: -0.3% v -0.1%e; Y/Y: 0.7% v 0.9%e
- (US) Weekly EIA Natural Gas Inventories: +87 bcf v +83-87 bcf expected range

Quantitative easing is officially over in the US and global markets are digesting the Fed's very well-telegraphed move. Meanwhile, US GDP may be good or not so good, depending on your analysis. German October CPI data suggest that Europe is nowhere near getting uninflation under control, although European indices have bounced back from the lows seen after the German data dropped. As of writing, the DJIA is up 0.73%, the S&P500 is up 0.08% and the Nasdaq is down 0.30%.

The advance look at the third quarter GDP was pretty rosy, with the headline figure much better than expected. However, analysts were quick to point out the a big gain in government spending was responsible for much of the outperformance, while the fixed investment, exports and imports all declined. Federal government spending broke a long string of declines by growing at a 10% rate in the quarter.

The Fed's low-key but decidedly less dovish moves yesterday continue to reverberate through global markets. The dollar marked its best levels in the European session, with EUR/USD testing three-week highs around 1.2560 before moving back up into the 1.26 handle. Spot gold just keeps moving lower, around $1,196 as of writing and headed straight for the key $1,180 area.

The Russian Ruble saw a substantial and sudden rally this morning after falling to another record low, just as US traders were coming into the market. Note that the Russian central bank is due to meet tomorrow morning and some are saying a 50 basis point rate hike (more than expected) could be on the table to help stabilize the currency, tame 8% inflation and slow capital outflows. Meanwhile, there were reports (later denied) that Ukraine and Russia had finally ironed out a deal on gas supplies for the winter, adding de-escalation to rate hike fever. USD/RUB fell from 43.4 as low as 41.4 after 07:00ET, before consolidating around 41.8.

Visa and MasterCard both topped earnings expectations in third-quarter reports, and Visa also offered rock solid guidance for FY15. Payments volume growth for both firms was up double digits. Note that executives from both firms said they remain somewhat wary of broader economic conditions, including the impact of geopolitical chaos and Ebola. Both V and MA are up nearly 10% a piece.

Oil majors Royal Dutch Shell and Conoco both saw income decline on a y/y basis, although the declines were slightly less than expected. Conoco offered little commentary on the decline in oil prices seen over recent months, while Shell did not hide its concerns. The company said its investment strategy is based on oil prices remaining between $70 and $110, and it also indicated $70 represented the likely bottom for prices.

Looking Ahead

- 13:00 (US) Treasury to sell $29B in 7-Year Notes 

- 15:00 (CO) Colombia Central Bank Interest Rate Decision

- 19:30 (JP) Japan Sept Jobless Rate: 3.6%e v 3.5% prior

- 19:30 (JP) Japan Sept National CPI Y/Y: 3.3%e v 3.3% prior; CPI Ex Fresh Food Y/Y: 3.0%e v 3.1% prior; CPI Ex Food, Energy Y/Y: 2.2%e v 2.3% prior

- 19:30 (JP) Japan Oct Tokyo CPI Y/Y: 2.7%e v 2.9% prior; CPI Ex Fresh Food Y/Y: 2.5%e v 2.6% prior; CPI Ex Food, Energy Y/Y: 2.0%e v 2.0% prior

- 20:05 (UK) Oct GfK Consumer Confidence: -1e v -1 prior