Dovish Rhetoric

October 17, 2014

Markets have a better tone. aided by some dovish remarks from Fed’s Bullard (maybe QE3 shouldn’t end now), Coerce (ECB to start buying assets very soon), Nowotny (euro depreciation constructive), Haldane (British data point to later rate hike rather than sooner), and Kuroda (BOJ easing to continue until 2% inflation secured). 

The 10-year Treasury futures yield (2.20%) is 5 basis points above Thursday’s close and 22 bps above intra-day low.

The 10-year British gilt recovered nine basis points.

WTI oil rose 1.6% to $83.96 per barrel.  Comex gold is 0.3% softer at $1,238.00 per troy ounce.

Share prices in Europe have risen the most in two months, gaining 2.0% in Spain, 1.8% in France and Italy, 1.7% in Switzerland and Germany and 1.0% in the U.K.

Stocks in the Pacific Rim, however, earlier fell by 1.4% in Japan and Taiwan and 1.0% in South Korea, but such gained 0.5% in Hong Kong, 0.4% in India, 0.3% in Australia and 1.6% in Indonesia.  China’s market fell just 0.1% in spite of a drop in the MNI index of business sentiment to a 6-month low of 51.7 in October from 52.2 in September and 59.0 in August.

The dollar is off 0.3% versus the Aussie dollar and has edged down 0.1% vis-a-vis the loonie, euro, Swissie and sterling.  The dollar is 0.2% firmer relative to the yen and unchanged versus the yuan and kiwi.

Chile’s central bank implemented its eighth 25-basis point interest rate cut in the past year, reducing such to 3.0%.

Late yesterday, the U.S. Treasury released August capital flow data showing a sizable net inflow of $52 billion long-term and $74.5 billion overall.

Construction output in the euro area recovered 1.5% in August and recorded a smaller year-over-year decline of 0.3%.  In 2Q, such had dropped 0.7% relative to 1Q.

Icelandic harmonized consumer prices were 0.4% higher than a year earlier in September.  Malaysian consumer prices posted a 2.6% on-year advance last month.  Portuguese producer prices fell by 1.0% in the year to September.

The French index of leading economic indicators was unchanged on month in August, while the index of coincident economic indicators edged up just 0.1%.

Italy recorded a EUR 2.3 billion current account surplus in August, while Spain that month had a EUR 2.9 billion trade deficit.

Canada releases consumer prices today.  The U.S. reports housing starts and the U. Michigan consumer confidence index.  Fed Chair Yellen will be at the Boston Fed delivering a speech on economic opportunity.  Not clear if she’ll comment on the recent market volatility or the last FOMC minutes that raised concern about the strength of the dollar.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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