1 December 2014
Ahead this week (busy!)
# It was all about the crude oil complexes Friday. The EuroStoxx600 snapped a 5 day winning streak Friday as energy shares took the top of the market, overpowering decent gains in airlines. The pan-European Stoxx was down a marginal 0.07% on the day for a gain of 0.58% on the week. Stateside, the return from the Thanksgiving Day holiday saw another narrow range session (in very light trade) with the Dow ending flat and the S&P down 0.25%. For the week the Dow eked out a 0.10% gain, the S&P edged 0.19% higher and the NASDAQ gained 1.65%. For the month U.S. equities were up about 2.5%. Interestingly December historically has resulted in gains for stocks. In the past 117 years, the Dow has posted its best average performance in December.
# Of further note, and potentially a negative, the VIX index soared over 10% despite the lack of movement in the underlying stock markets.
# The U.S. crude oil contract WTI (West Texas Intermediate) simply collapsed Friday, shedding a whopping 10% from US$73.00 to $66.00 a barrel, the largest one day loss since the onset of the GFC. The accelerating fall being further response to the growing global oil glut and OPEC’s Thursday decision not to reduce output. Debate rages now rages as to whether the fall has dangerous deflationary implications for the world or whether it is an early Christmas present for consumers and manufacturers.
# Regarding other key commodities, for the week gold fell 2.82%, Copper fell 5.77%, WTI Crude collapsed 14.1% and iron ore closed the week unchanged.
# The Swiss referendum on the SNB having to shore up their Gold holdings failed with roughly 78% voting against expanding central bank gold reserves to 20% of central bank assets from the current 7%. Expect some volatility this morning on the open of the precious metals markets.
# U.S. yields fell again Friday with the 10 year note ending the week at 2.16% from 2.23% Thursday and a high of 2.34% earlier in the week. The degree of move over the week is not insignificant and we always take note of the bond market, believing it to be the smartest of the various asset markets . Meanwhile German 10-year yields continued to hug historic lows at 0.70%.
# The much heralded ‘Black Friday’ start to the U.S. shopping season looks to have got off to a slow start with reports of thin crowds and many comments from consumers that, with the rise of widespread internet discounting available day to day, that the event is now “just another shopping day’.