Market Update For March 16, 2015
Wholesale prices continued their downward trend in February. They fell (.5%), a “little” below the consensus of a .3% rise. This is the 6th drop in seven months and have put year over year prices in the negative territory. Trade services costs have dropped as a result of the stronger dollar. Weaker currencies mean goods and services coming ashore in the US are cheaper than home grown. The USD is up 17% since July and just hit a new high last week, thus giving a good discount to foreign goods and services. The double whammy of lower energy prices and a strong dollar have in fact resulted in deflationary pressures. It’s going to be real interesting to see how the Fed is going to play off raising rates. Both the Consumer price index and Producer price index have gone negative for the first time since the recession.
The Financial Times is reporting that the UK has reached out the Asian Infrastructure Bank which competes with the US backed World Bank. US officials are furious and……. out of touch. In other news, Germany is preparing for Greece to exit the euro. We’ve heard this before, it might have legs this time though. It appears that Greece’s temper tantrum hasn’t worked. Wouldn’t that be fun for the markets?
What to watch for this week? Let’s see if the Fed formally removes the word “patient” from their language. The “Fed speak” is pretty much priced into the market, but I am expecting some interesting moments this week.
Market Update For March 9, 2015
Thankfully, the markets have returned to some normal levels in the last week. We’ve had a bit of a ride. After all, Treasuries usually rebound….until the day they don’t. We’re nearing the low end of the resistance curve and if we have a break out below 2.08, we could see a further trend downward.
So why the drop if Yellen and her Merry Band are going to raise rates sooner rather than later? There’s some interesting things happening in Europe these days. The trade weighted dollar is up 4.5% month to date as money is leaving low yield European debt and flows into treasuries. The dollar’s surge and falling oil prices have weighed heavily on equities, both the Dow and S&P are down YTD.
Back to treasuries…I’m not done there. We’ll definitely know more when we see more numbers out of Europe and what the Fed does with their ‘Patient’ language next Wednesday. Oh, one more thing….almost forgot! In Greece, the defense minister threatened to open the country’s borders and flood Europe with Islamic refugees and IS terrorists if the EU does not come through with funding required for the debt payment in coming weeks. Nothing says “we’re best friends forever and ever ” more than that!! No, I did not make that one up… Stay tuned for further developments.