Diamond Princess visiting Port Melbourne today
IN PORTFOLIOTICKER TODAY
Ruble stabilises above USD0.016
The ruble has recovered slightly from yesterday’s low of USD0.01291 (Chart: xe.com)
Russian Prime Minister, Dmitry Medvedev has ruled out capital controls. “Central bank and the government have worked out a package of measures to stabilise the situation. What we are seeing today is mainly emotional games. It is in our interests to bring order to the markets, no one gains from instability. But at the same time, there is no need for tough regulations, as used to happen in the past. It does not bring anything good – we shall use market tools.
Deputy finance minister Alexei Moiseyev has said Russia is going to sell foreign currency from its treasury accounts “as much as necessary and as long as necessary“. More
“At least the Russian authorities have figured out that letting your currency drop 10% one day, more or less 20% the next peak to trough… might not be such a good idea in terms of financial security… and are finally beginning to join up the dots, and think collectively, to try and re-assure markets.”
Timothy Ash, Head of Emerging Market Research, Standard Bank More
Margin consequences for investors
“Due to the uncertain economic situation in Russia causing extreme volatility and lack of liquidity in RUB, Saxo Capital Markets has decided to increase the margin requirement for RUB with relatively short notice.
During the trading day of Tuesday, 16th December, RUB has weakened more than 30% against USD. We could be hours away from ‘capital restrictions’ in Russia. This is a sensible step to take when money is flowing out as aggressively as at the moment in Russia.
You should expect that Saxo Capital Markets will continue to stream FX Spot RUB, but for very low threshold. FX Options will be on reduce only and FX Forwards on RFQ.
Change to opening hours in RUB: As of today RUB will be tradable from 7am GMT to 4pm GMT. Please note that the RUB market will be closed due to New Year holiday from 31 December to 9 January, both days included.
New margin requirement: 40%, up from current 8%. Effective: Wednesday, 17 December at 22:00AEDT”
Saxo Bank, “Email to Investors: Increase in margin requirement for RUB“, 17 Dec 2014
Inflation (HICP) – Nov 2014
Annual inflation in the euro area and EU (Chart: Eurostat)
“Euro area annual inflation was 0.3% in November 2014, down from 0.4% in October. A year earlier the rate was 0.9%. European Union annual inflation was 0.4% in November 2014, down from 0.5% in October. A year earlier the rate was 1.0%. These figures come from Eurostat, the statistical office of the European Union.
In November 2014, negative annual rates were observed in Bulgaria (-1.9%), Greece (-1.2%), Spain (-0.5%) and Poland (-0.3%). The highest annual rates were recorded in Romania and Austria (both 1.5%) and Finland (1.1%). Compared with October 2014, annual inflation fell in sixteen Member States, remained stable in five and rose in six.
The largest upward impacts to euro area annual inflation came from restaurants & cafés (+0.09 percentage points), rents (+0.08 pp) and tobacco (+0.06 pp), while fuels for transport (-0.22 pp), telecommunications and heating oil (-0.09 pp each) had the biggest downward impacts.”
Eurostat “Inflation (HICP) – Nov 2014“, 17 Dec 2014 More
Consumer price index (CPI) – Nov 2014
“The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.3 percent in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.3 percent before seasonal adjustment.
The gasoline index posted its sharpest decline since December 2008 and was the main cause of the decrease in the seasonally adjusted all items index. The indexes for fuel oil and natural gas also declined, and the energy index fell 3.8 percent. The food index rose 0.2 percent with major grocery store food groups mixed.
The index for all items less food and energy increased 0.1 percent in November. The shelter index rose 0.3 percent, and the indexes for medical care, airline fares, and alcoholic beverages also rose. In contrast, the indexes for apparel, used cars and trucks, recreation, household furnishings and operations, personal care, and new vehicles all declined in November.
The all items index increased 1.3 percent over the last 12 months, a notable decline from the 1.7 percent figure from the 12 months ending October. The index for all items less food and energy has increased 1.7 percent over the last 12 months, compared to 1.8 percent for the 12 months ending October. The food index has risen 3.2 percent over the span. However, the energy index has declined 4.8 percent over the past 12 months, with the gasoline and fuel oil indexes both falling over 10 percent.”
Bureau of Labor Statistics “Consumer price index (CPI) – Nov 2014“, 17 Dec 2014 (08:30) More
“The consumer is getting a well-deserved break. We’re seeing a little more wage growth, more jobs, better confidence and finally a price break at the pump. It adds up to a very strong holiday season.”
Stuart Hoffman, Chief Economist, PNC Financial Services Group Inc. More
Real earnings – Nov 2014
“Real average hourly earnings for all employees rose 0.6 percent from October to November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from a 0.4 percent increase in average hourly earnings combined with a 0.3 percent decrease in the Consumer Price Index for All Urban Consumers (CPI-U).
Real average weekly earnings increased by 0.9 percent over the month due to the increase in real average hourly earnings combined with a 0.3 percent increase in the average workweek.
Real average hourly earnings increased by 0.8 percent, seasonally adjusted, from November 2013 to November 2014. This increase in real average hourly earnings, combined with a 0.3 percent increase in the average workweek, resulted in a 1.1 percent increase in real average weekly earnings over this period.”
Bureau of Labor Statistics, “Real earnings – Nov 2014“, 17 Dec 2014 (08:30am) More
Federal Open Market Committee meeting: 16-17 Dec 2014
“Information received since the Federal Open Market Committee met in October suggests that economic activity is expanding at a moderate pace. Labor market conditions improved further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices. Market-based measures of inflation compensation have declined somewhat further; survey-based measures of longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced. The Committee expects inflation to rise gradually toward 2 percent as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate. The Committee continues to monitor inflation developments closely.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
Federal Reserve, “Statement by Federal Open Market Committee after its meeting of 16-17 Dec 2014“, 17 Dec 2014 (14:00pm) More
“They’re clearly putting wording there that they have no sense of urgency in trying to normalize policy. They don’t see inflation pressure on the horizon. With the statement, and if we can see some stabilization in oil prices, we’re well poised for a rally here perhaps through the year-end.”
Peter Jankovskis, Co-Chief Investment Officer, OakBrook Investments LLC ($1.9 billion) More
“They’re being very conservative, adding that they’ll be patient but basically saying they’re going to take their time raising rates. There’s no way they’re raising rates in July, it’s at least fourth quarter 2015 or further out. This certainly favors risk assets, they’re loving it and reacting accordingly.”
Doug Cote, Chief Market Strategist, Voya Investment Management LLC ($215 billion) More
USA and Cuba to normalise relations
Extract: Proposed US actions to normalise relations between USA and Cuba
“Re-establish diplomatic relations
Our diplomatic relations with Cuba were severed in January of 1961. The President is immediately reopening discussions with Cuba and working to re-establish an embassy in Havana in the next coming months. The U.S. will work with Cuba on matters of mutual concern that advance U.S. national interests, such as migration, counternarcotics, environmental protection, and trafficking in persons, among other issues.
More effectively empower the Cuban people by adjusting regulations
The President is taking steps to improve travel and remittance policies that will further increase people-to-people contact, support civil society in Cuba, and enhance the free flow of information to, from, and among the Cuban people.
Facilitate an expansion of travel to Cuba
With expanded travel, Americans will be able to help support the growth of civil society in Cuba more easily, and provide business training for private Cuban businesses and small farmers. Americans will also be able to provide other support for the growth of Cuba’s nascent private sector.
General licenses will be made available for all authorized travelers in 12 existing categories
1. Family visits
2. Official business of the U.S. government, foreign governments, and certain intergovernmental organizations
3. Journalistic activity
4. Professional research and professional meetings
5. Educational activities
6. Religious activities
7. Public performances, clinics, workshops, athletic and other competitions, and exhibitions
8. Support for the Cuban people
9. Humanitarian projects
10. Activities of private foundations, research, or educational institutions
11. Exportation, importation, or transmission of information or information materials
12. Certain export transactions that may be considered for authorization under existing regulations and guidelines
Authorize expanded sales and exports of certain goods and services from the U.S. to Cuba
The expansion will seek to empower the nascent Cuban private sector and make it easier for Cuban citizens to have access to certain lower-priced goods to improve their living standards and gain greater economic independence from the state.
Authorize American citizens to import additional goods from Cuba
Licensed U.S. travelers to Cuba will be authorized to import $400 worth of goods from Cuba, of which no more than $100 can consist of tobacco products and alcohol combined.
Initiate new efforts to increase Cubans’ access to communications and their ability to communicate freely
Cuba has an Internet penetration of about five percent – one of the lowest rates in the world. The cost of telecommunications in Cuba is exorbitantly high, while the services offered are extremely limited. Now, telecommunications providers will be allowed to establish the necessary mechanisms, including infrastructure, in Cuba to provide commercial telecommunications and internet services.”
White House, “Charting a new course on Cuba“, 17 Dec 2014 More
Stock market indices
||31 Dec 13
Oil prices appear to have paused their fall:
- West Texas Intermediate (WTI) (Jan 2015) $56.08/barrel (+0.15%)
- ICE Brent Crude (Feb 2015) $60.73/barrel (+1.20%)
The shape of the day
Market indices today (Chart: Yahoo Finance)
Nightly Business Report: 17 Dec 2014 Watch Read
“The game has really changed in terms of inflation. There’s heightened uncertainty in international markets. The drop in oil prices has kept the lid on inflation. The Fed has to wait to see how these two factors play out. That’s why they retained dovish language.”
Jeff Kravetz, Regional Investment Director, US Bank Private Client Reserve More
||31 Dec 13
USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)
Stock price movements
The shape of the portfolio today (Chart: Yahoo Finance)
Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)
Portfolio stock prices
||31 Dec 13
The AUD fell against a stronger USD today (Chart: xe.com)