25 August 2014
Ahead this week (high impact only)
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# European stocks closed lower Friday as the controversial Russian aid convoy passed into Ukrainian territory. Viewed as an act of aggression by the Kiev government the Russian move rattled investors sending the Stoxx600 to a 0.20% loss. For the week however it was a good one with the pan-Europe index ending up 2.13%. Stateside trade was all about Yellen’s Jackson Hole speech and the fact that she wasn’t overtly dovish sent the S&P500 to a slightly weaker close. The big board also lost 0.20% on the day for a solid +1.70% week.
# Yellen’s long awaited speech from the central banker symposium was notable for her dropping of her well-publicized dovishness surrounding the labour market in favour of an “it depends” stance. In that regard the market took the speech as a more hawkish account. Yellen gave a very balanced discourse bringing in a lot of nuances surrounding the overall health of the labour market. No simple guidance around monthly payrolls or unemployment rates for this Fed chair, instead a ‘dashboard’ approach including, the participation rate, rates of underemployment, long term unemployed and wage deflation/inflation factors stemming from the Great Recession.
# ECB president Drgahi speaking at the same event was at pains to point out the divergence in economic direction of the U.S. and Euroland. Along with his now unconditional support for QE it appears that Draghi was attempting to influence the EUR/USD rate (beggar thy neighbor policy?) with good effect at the pair is 50 points lower this morning upon the open.
# Last cab off the rank was the BOJ’s Kuroda who spoke after the close on Friday. While being relatively upbeat about the progress being made to fight deflation and improve employment he emphasized that the job was far from being complete and the aggressive monetary policy easing would continue for quite some time before the goal of anchoring inflation expectations at 2.0% is achieved. As with the EUR, the USD/JPY is stronger this morning as Asia reacts, the pair reaching a 7 month high of 104.43.
# Despite the firmer US dollar and sluggish reaction to the central bank speak on Wall Street both gold and copper made gains on the day. Gold rose nearly $4 to $1,280.50 while Copper gained 0.87% to post its biggest weekly gain in nearly a year. WTI Crude eased 0.33% and iron ore continued its slide, falling nearly 2.0% to 90.10. Iron ore has fallen over 6% since Aug 6 and was fixed at its lowest level since June 16. For the week gold fell 1.81%, Copper soared 3.09%, Crude plunged 3.80% and iron ore dived 3.53%.
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