Risk-On Trading Continues into New Year

Happy New Year! Big Week Ahead

This week there are two key days to watch the US economic calendar. On Wednesday afternoon the FOMC will release the minutes from its most recent policy meeting in December 2017, which should provide more granular insight into the Fed’s most recent decision to for the third hike in the benchmark borrowing in 2017.  Kashkari (Minneapolis) and Evans (Chicago) were the two dissenters with the rate hike decision at that December meeting. What else do Kashkari and Evans have in common?  Neither will be voting members in 2018.  
 
December Employment Data will be released on Friday morning at 8:30am Eastern time, where median forecasts are calling for a 190k addition to nonfarm payrolls (225k prior month) and an expectation of a 4.1% December unemployment rate (no change).  

 

 

Dollar Takes its Lumps, Stocks Advance, Bonds Sell Off

The US dollar began the new year following its general 2017 trend, declining 0.4% against major currencies to its lowest level in more than three months.  All three major stock indices were up on the day – S&P up 0.8%, Dow up 0.4% and the Nasdaq leading the way up 1.5%. Tech stocks were the largest driver of the rise, followed by energy stocks, driven largely by the continued spike in the price of crude. With political unrest out of Iran, crude closed the day up to around $60.35/barrel, despite news out of Russia that the nation’s oil sector has continued its plan for long-term production expansion.
 
US Treasurys experienced a steep selloff early in the trading session, with yields/rates climbing 3-8 bps across the curve in a bear-steepening pattern.  A portion of the move was driven by the news out of Europe that the ECB’s asset purchase program may be coming to a close.  Benoit Coeure, the board member who oversees ECB market operations, told news site Caixin Global that “given what we see in the economy, I believe that there is a reasonable chance that the extension of our asset purchase program decided in October can be the last.”  The yield on the 10-year Treasury note is currently 5 bps higher on the trading session closing near 2.46%.