Europe
Despite what was quickly becoming a currency crisis in Russia; markets in Europe have come out relatively unscathed. The Federal Reserve’s unchanged economic outlook despite improving economic data has accelerated gains on Thursday.
The Swiss national bank surprised markets by moving to a negative interest rate. The purpose of the drastic move was to prevent appreciation of the Swiss currency coming from investors looking for a safe haven, notably from Russia.
In Germany business confidence rose in line with expectations in December helping the Xetra DAX recover two thirds of losses from its recent all-time high.
In his press conference Russian President Putin has laid the blame for Russia's economic problems abroad rather than at his own feet. Putin’s one concession was that Russia could have diversified more away from oil but caveated it saying it is the country’s most attractive asset and will naturally get the most investment from home and abroad.
In his speech Putin prepared Russians for potentially two years of economic problems and said Russia should prepare for $40 oil. He was fairly dismissive of the recent currency crisis likely in an attempt to offer some sense of calm to the watching Russian population
The UK consumer has reacted to the sharp drop in oil prices with a spending bonanza. UK retail sales grew by 1.6% in November against expectations of 0.4%. That puts annual retail sales growth at very healthy 6.4% against 4.4% expected.
Airlines and leisure shares have been the biggest beneficiaries of lower oil prices to date but the latest retail sales numbers suggest the consumer discretionary sector including clothing, homeware and electronics retailers maybe the next in line.
A recovery in oil and gold prices on Thursday helped oil shares Petrofac and Tullow Oil Plc (LONDON:TLW) to the top of indices alongside Randgold Resources (LONDON:RRS) and Fresnillo Plc (LONDON:FRES).
US
US markets continued yesterday’s blistering Fed-induced rally but not all of the economic data was a bright as the strength of markets would suggest.
Unemployment claims fell more than expected but the Markit services PMI and Philly fed manufacturing survey saw wide misses.
FX
The US dollar was mixed today showing some strength but losing out to the pound because of strong retail sales data in the UK as well as oil-currencies the Canadian dollar and Norwegian Krone
The Swiss franc saw its biggest daily fall in nine months against the euro after the SNB moved to NIRP. To the average depositor, keeping your money somewhere that will cost you money is certainly not too attractive. For the safe-haven seeking speculator, the negative rates may not be all that much of an disincentive. An annual loss of -0.25% is a small price to pay to avoid the kind of -20% loss in just one day seen in the Russian ruble on Tuesday.
Commodities
Gold and silver prices were higher on the Fed’s more diplomatically hawkish stance. While the Fed remains accommodative there is still some scope for higher prices in precious metals.
Oil prices rallied with Brent crude having found an interim base at $58.50 just below the $60 forecasted by multiple oil ministers. The prospect of lower upstream investments after multiple oil companies announced capital expenditure budget-cuts for 2015 has prompted enough speculators to position for a rebound that the downtrend has paused for now.
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