Daily Market Color

Markets Struggle for Direction as Rally in Equities Stalls

Stocks traded mixed while Treasuries and swap rates fluctuated as markets struggled for direction on another day of light data.  Given the recent run-up in risk assets since Friday’s disappointing payrolls report, it makes sense that markets have taken a brief pause to reassess.  The IMF cut its global growth outlook today, citing a slowdown in emerging markets due to the slump in commodity prices.  The IMF now predicts growth of 3.1% in 2015, down from a July forecast of 3.3%, and growth of 3.6% in 2016, down from the 3.8% estimated in July.  Somewhat surprisingly, the fund left its outlook for China’s growth this year and next unchanged, but they acknowledged that the “cross-border repercussions” of decelerating Chinese growth are more severe than originally anticipated.  At its annual meeting this week in Lima, the IMF is expected to encourage loose monetary policy and increased infrastructure spending to spur growth in sluggish economies.

Today’s one notable US economic report showed the trade gap widened sharply in August, reflecting a drop-off in exports due to the strong dollar and weak overseas growth.  The report showed the gap increased 15.6%, the most in five months, as exports fell significantly.  Additionally, there is a $24 billion 3-year note auction at 1pm ET and Fed speakers including KC’s George (hawk, voter ’16) and SF’s Williams (dove, voter ’15).

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