Russian Ruble Melts Down

Economic Data

- (US) Federal Reserve FOMC begins 2-day meeting 
- (US) ICSC Chain Store Sales w/e Dec 12th: w/w: +3.0%; y/y: +1.1%
- (HU) Hungary Central Bank (NBH) left Base Rate unchanged at 2.10% (as expected)
- (PL) Poland Nov CPI Core M/M: -0.1% v 0.0%e; Y/Y: 0.4% v 0.5%e
- (PL) Poland Nov Average Gross Wages M/M: % v 1.5%e; Y/Y: % v 3.6%e
- (PL) Poland Nov Employment M/M: % v 0.1%e; Y/Y: % v 0.8%e
- (US) Nov Housing Starts: 1.028M v 1.040Me; Building Permits: 1.035M v 1.065Me
- (CA) Canada Oct Manufacturing Sales M/M: -0.6% v -0.3%e
- (CA) Canada Oct Int'l Securities Transactions: C$9.5B v C$4.0Be
- (US) Redbook Retail Sales w/e Dec 12th: +4.1% y/y, Dec MTD: -1.2% m/m; Dec MTD: +4.0% y/y
- (EU) Weekly ECB Forex Reserves: €230.5B v €231.9B prior
- (US) Dec Preliminary Markit Manufacturing PMI: 53.7 v 55.2e

Russia is in crisis this morning as the Ruble collapse whips around a wide spectrum of global asset classes. The 10-year UST yield dropped as low as 2.01% before trading to 2.08%, while the 10-year Bund remains just off record lows at 0.599%. European stocks zigzagged through the session, while the S&P500 has dug itself out of the red as smaller energy stocks bounce higher with a small move up in crude prices, propelling US indices to their highs. Almost unmentioned today is the beginning of the last FOMC meeting of 2014. As of writing, the DJIA is up 0.83%, the S&P500 is up 0.43% and the Nasdaq is up 0.30%.

The dramatic collapse of the Russian Ruble is in sharp focus this morning. The ruble had gained around 8% after the Russian Central Bank raised rates by 650 basis points to 17% from 10.5% on Monday afternoon (early Tuesday morning local time), but those gains vaporized as USD/RUB shot up to 79 and then settled around 72.80 in mid-morning trade. The ruble is now down by more than 20% against the dollar on the week and down by 56% YTD.

The preliminary December Markit manufacturing PMI survey fell to 53.7, its lowest level since the Polar Vortex back in January. Analysts note this is the fourth sequential monthly decline from the record highs seen in August and also the fourth miss of expectations. The employment sub-index dropped to its lowest level since July and new orders are also at their lowest level since Janauary.

WTI futures bottomed out below $54 this morning and have bounced a bit higher over the last three hours, trading as high as $56. Brent bottomed around $58.60 before going back above $60. The bounce in oil has propelled multiple smaller drillers much higher this morning, while oil services ETF OIH has bounced up 3.9%. For reference, Range Resources is up 8% and Rex Energy is up 12%.

Investment bank Jefferies Group LLC (owned by Leucadia National) reported a quarterly net loss and said it was looking to sell off its recently purchased futures brokerage, Bache. Jefferies bought the business from Prudential Financial in 2011 to expand into a full-fledged investment bank. In the quarter Jefferies' investment banking revenue fell 24% to $316 million, with executives citing lackluster fixed income trading in a tepid trading environment.

Looking Ahead

- 16:00 (KR) South Korea Nov PPI Y/Y: No est v -0.7% prior- 16:30 (US) Weekly API Crude Oil Inventories
- 18:50 (JP) Japan Nov Trade Balance: -¥992.0Be v -¥736.9B prior; Adjusted Trade Balance: -¥982.8Be v -¥977.5B prior; Exports Y/Y: 7.0%e v 9.6% prior; Imports Y/Y: 1.6%e v 3.1% prior (revised from 2.7%)