November 21st – Weekly Update

  • U.S. equity indexes were relatively flat as a Federal Reserve interest rate hike becomes more imminent. The Dow, S&P500 and Nasdaq each posted small gains following another week of political spectating and policy predictions. The 10-year Treasury yield reached its highest level of 2016 during the period and closed at approximately 2.34%. Oil prices rose and gold lost ground. The U.S. dollar reached a new 13-year high.
  • There were no surprises in Fed Chair Yellen’s appearance before Congress’s Joint Economic Committee during the week. In response to questions, Yellen remarked that uncertainty may persist for a considerable time following the U.S. presidential election, but that a gradual tightening path may still be appropriate.
  • Yellen’s prepared remarks did not explicitly mention a December hike, however she reiterated the FOMC’s October statement that the case for a rate hike continues to strengthen. Fed funds futures are pricing a greater than 90% probability for a December increase.
  • Headline U.S. month-to-month October CPI rose 0.4%, in line with consensus and better than September’s 0.3% rate. The index rose 1.6% year-to-year, its best annual rate since October 2014. Core prices (all items less food and energy) rose 0.1% month-to-month, the same level as September but below consensus for a 0.2% rise.
  • October housing starts came in well ahead of consensus at a seasonally adjusted annual rate of 1.323M, better than consensus for 1.160M and ahead of last month’s upwardly revised 1.054M level. Starts were up 23.3% year-to-year.
  • The advance seasonally adjusted U.S. initial unemployment claim for the week ending November 12 measured 235,000 – the lowest level for initial claims in over forty years and below the 257,000 consensus.
  • The U.K. labor market showed weakness in a 3-month to 3-month comparison falling to 49,000 from 106,000. However, average weekly earnings were positive with a 2.4% increase year-over-year.
  • Investor confidence rocketed in Germany with the ZEW expectations measure climbing to 13.8 in November compared to 6.2 in October. The euro zone ZEW measurement also increased from 12.3 in October to 15.8 in November.

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