Yellen Argues for Gradual Rate Hike
The expedited meeting at the Fed unnerved many. While no economic policy change should be expected before the December 15-16 meeting, the Fed is clearly not in the camp of negative interest rates. They are looking to raise rates to aid pension funds and you cannot lower rates to “stimulate” the economy (although that never works anyhow) unless you raise rates first.
The Fed’s October meeting minutes, as well as speeches by various Fed officials, all clearly hinted that a December rate hike is likely to be in the works. Today’s meeting saw Janet Yellen, the Federal Reserve Chair, argued for gradual rate “normalization”, and called an interest rate hike “appropriate” provided they continue to see progress toward labor and inflation goals.
Europe – Here we GO Again
The European economic crisis just keeps getting worse. The European Commission is now planning to pool all money for bank bailouts among nations. That means the funds set aside in Germany to weather German bank failures can be used in France. Meanwhile, the EU is preparing for relaxing the stability policy (austerity) because of refugees and terror. This emergency position will allow countries to now increase their debt under the exception of “Acts of God”. This clause can be pretty much justify anything.
Furthermore, now tens of thousands of pensioners in Germany have to pay taxes on their pensions for the first time in 2016. Through a pension increase of 2.5%, this will result in a lower net take-home for the first time since this will exceed the basic allowance in the coming year. The Ministry of Finance expects characterized with 310 million euros in additional tax revenue.
EU To Crack Down on BitCoin Claiming to Prevent Terrorism
A
Bitcoin (virtual currency) paper wallet with QR codes and coins are
seen in an illustration picture taken at La Maison du Bitcoin in Paris
July 11, 2014. REUTERS/Benoit Tessier
Will Rogers – Political Reality
“I don’t make jokes. I just watch the government and report the facts.”
Will Rogers
Market Talk – November 23rd, 2015
With the Nikkei closed for a national
holiday it was left to the Shanghai and Hang Seng to set the tone for
the European markets following the weekend security fears in Belgium.
Consequently, the Euro opened weak, as confidence continues to drift
forcing money towards the US Dollar. Following this sentiment all
European indices drifted lower in what appears to be early Christmas
seasonal trading. It was profit-taking in a holiday shortened week
that saw the US markets drift lower. Oil prices were initially to blame
but after the Saudi comment (They are ready to work together in order to
support prices) we did see a 1% bounce in prices – away from the $40
level – but equities remained heavy.
In the Fixed-Income market Europe and the
peripherals all traded heavy when economic data (November flash PMI)
released slightly better than expected and saw buyers backing away.
Tomorrows GDP (Germany) release will be of special interest as we
approach Central Bank invoked nerves. The spread between US and Germany
made a large move tighter today when Bunds lost amlost a full point with
US Treasuries back close to unchanged. The spread this evening was last
seen at +171bp (6bp tighter on the day).
The US Dollar continues to trade well with the DXY (USD Index) last
seen trading at 99.87 (+0.3%). The oil exporters and emerging market
currencies continue to trade soft today. The Russian Rouble lost 1.7%,
A$ -0.75%, the Turkish Lira was down 0.9% and even GBP was down -0.55%.Some dealers were commenting that next week is probably the last busy week ahead of Christmas and consequently are already trying to position the book for Christmas. Carrying positions (especially in off the runs) is going to be expensive and capital intensive and so expect spreads between liquid and illiquid to widened even further.
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