December 31, 2015

Markets Today – Déjà vu, jamais vu or presque vu?

Ever get the feeling that you’ve been here before?

Ever get the feeling that you’ve been here before?  It is the end of another year with oil prices very weak – having fallen by around a third again since the summer (as it did in 2014), China fears are at the fore and everyone is still talking about the Fed.  But at least the latter has finally done what they said they would.  Or did they?  Maybe it never actually happened, or it almost did, or happened again and again, then really didn’t.

All of this has happened before, and all of it will happen again.

One classic book and a classic sci-fi reference for any Sheldons.


UK House prices rose the most in eight months in December with further gains expected which could push the average price of a home past £200,000 in the coming months.  The annual growth rate increased to 4.5% and the usual themes recur – supply shortages nationwide, the South outperforming the North and London leading the pack.  In our sister publication, Credit Today, we have repeatedly noted that the Bank of England is ready to increase its measures to temper the booming buy-to-let market as well as the risks from rapidly increasing prices in the country.

In a little contrast to the above, US pending house sales fell by almost 1% in November whereas expectations were for an increase of 0.7%.  The home market is likely softening although the small gains of prior month were revised upwards slightly.  Reasons commented for the weakness include tighter mortgage rules, rising prices and limited supply.  The Fed rate rise probably won’t have had too much of an impact at this stage.


…and we’re down again…world equity markets ignored the Australian stock gains of Wednesday and decided to prepare for New Year with red numbers on screens rather than green as almost every other index closed up to 1% lower.

Oil reversed Tuesday’s strong gains with inventories higher and is back below $37/bbl after falling over 3%.  Iron ore continues its stealthy price increases rising almost 3% to $43.42/tonne and gold was off by 1%.  John Mack, the former Morgan Stanley CEO and now a non-executive director at Glencore, gave an interesting interview covering a few industries.  He was generally bullish on China and commodities in the longer term but cautions on coal prices.  He also reaffirmed Glencore’s commitment to maintaining its investment grade credit rating as it cuts production where it can and retains its focus on its trading activities.

The NOK, SEK and CAD were all weaker overnight with oil’s declines.  NZD suffered a little risk-off selling but the AUD held up pretty well and is at 0.7289 in a tight trading range.  The Swiss franc (CHF) was the best performer overnight and I’m told this is nothing to do with significant fresh snow forecasts for most ski resorts.

US 10-year Treasuries didn’t rally as much as one would have thought after Tuesday’s sell off, closing down by only 1bp to 2.29% and even looked like they could close wider until later in the session.

Credit markets were uneventful but generally ground slightly tighter.  Resource companies fared poorly but Freeport-McMoRan, the struggling miner, saw some tightening in its CDS price, although this does remain at very wide levels.  The company has been targeted by the activist investor Carl Ichan and his board presence is being seen following the announcement that its chairman and co-founder will step down (with an almost US$100m payout and large ongoing consulting payments).  Also making corporate news (and what a shame it isn’t listed in the UK), Weight Watchers continues to pile on the dollars, rising by almost a third over the past couple of days after a video by new board member and media star Oprah Winfrey was released.

Coming Up

Australia private sector credit is released at 11.30am today and US initial jobless claims tonight (just after the fireworks finish if you’re in the mood).  China manufacturing PMI comes out when people without children wake up tomorrow, at noon.

That’s it – have a very happy New Year and the regular Markets Today crew will be leaping back in 2016.

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