2015/11/19 TrendView VIDEO: Global View (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Thursday, November 19, 2015 (early)
Global View: All Markets
The Minutes Matrix we alluded to yesterday morning did indeed yield the sentiment we expected from the FOMC October meeting. The dominant expectation was they were feeling the economy is strengthening enough to warrant a December meeting hike. Yet it was most interesting that there was also almost as much rate hike dissent at the October meeting as we saw in September. This was reinforced by Cleveland Fed President Mester’s appearance on CNBC this morning. When asked whether she was ‘dove’ or ‘hawk’, she responded that she was an ‘owl’. In other words, there are likely others like her on the FOMC who remain more ‘data dependent’ than the hawks would like to believe.
And as we have noted for some time in the wake of the much weaker economic data since last, quite strong US Employment report, there is good reason to question if December will indeed be the right window for the Fed to put through that first rate hike in nine years. Noted repeatedly of late is last Monday morning’s OECD Semi-annual Outlook. The bottom line is that much of the world including the US is less constructive than recent Fed views, still led by China and emerging economies. Yet that includes the prescient indication Japan was weakening again, and the UK remaining weak as well. The idea Europe is strengthening is only in the context of how weak it was.
[NOTE: We updated the Market Observations below Wednesday’s Concise Highlights TrendView video analysis early this morning for the benefit of any subscribers who wanted to see our post-FOMC minutes assessment prior to this morning’s video analysis. Those remain our views, and they are posted once again below the video in this post.]
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Video Timeline: It begins with macro (i.e. fundamental influences) mention of the factors noted above, and we note the equities recent failure was in spite of recent strong US Employment figures spreading elsewhere. While that might have been a sign Q4 will be the long anticipated recovery, recent indications at the end of last week and this week are less constructive, including much of the data and Japan sinking back into recession.
It moves on to S&P 500 FUTURE short-term at 03:00 and intermediate term view at 05:30, OTHER EQUITIES from 07:45, GOVVIES beginning at 11:00 (with the DECEMBER BUND FUTURE at 14:00) and SHORT MONEY FORWARDS from 15:45. FOREIGN EXCHANGE covers the US DOLLAR INDEX at 18:30, EUROPE at 20:15 and ASIA at 23:00, followed by the CROSS RATES at 26:00 and a return to S&P 500 FUTURE short term view at 29:45. We suggest using the timeline cursor to access analysis most relevant for you.
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Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion and TrendView Video Analysis and General Update. Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion.
▪ And the real influence is going to be whether the markets believe the economy is indeed still getting stronger in the wake of economic data that has softened again since the US Employment report into weaker than expected US Retail Sales last Friday. That has been followed by weak US and international data this week. That includes Monday’s Japanese GDP that indicated it is back in recession, Tuesday’s UK CPI remaining in negative ground, and roundly negative numbers Wednesday morning into a much weaker than expected US Housing Starts (an area supportive of a stronger US view previous.)
And this morning has brought a weak Chinese MNI Business Indicator and Japanese All Industry Activity Index even if its Store Sales are a bit stronger than expected. And UK Retail Sales and CBI Trends Total Orders were weaker than already soft estimates, yet with US Philly Fed and Leading Indicators coming in just a bit better than expected. However, all of this is the micro influence that still fits in with the weaker OECD Outlook, and other than the accommodative central bank forcing investors into risk assets there is a question over whether the equities are reflecting real strength or financial flows?
▪ And as also seen previous, if there are enough doves left the govvies do not necessarily need to take fright, and the US dollar will not exhibit any further strength. The adamant assertions of the hawks have grabbed more headlines, and that left the likelihood the meeting minutes would reflect some need to raise rates. But if the economic data remains weak, there are possibly still enough doves to leave the impression that the highly anticipated FOMC December hike may still not occur; as equities seem to believe.
The constructive activity in the govvies seemed to reinforce this. Either the govvies were confident there may be no hike in December, or that if it does come, it could be a policy mistake (i.e. weakening the economy.) The same goes for the US Dollar Index, which was at the top of its post-US Employment rally yet weakened after the FOMC minutes release. Hardly a ringing confirmation a Fed December rate increase is a ‘done deal’.
▪ While there is much to discuss on the macro background factors, we are developing a more major Extended Perspective macro background view that will be posted soon. That will go beyond the OECD assertions to other important anecdotal and statistical perspectives. In the meantime we suggest proceeding directly to those Market Observations below the video analysis that were updated early this morning.
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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