The dollar is stronger this morning as it continues to beat the stuffing out of most other currencies around the globe. The euro, yen, and pound sterling were all lower against the greenback, with the pound falling to a 14-month low. This has been attributed to falling home prices in England and apprehension that the deflation contagion from the EU may engulf the British isles, as well.
Wall Street opened lower this morning following a bouncy day for stocks that saw the Dow Jones reach a new high while the Nasdaq and S&P 500 were essentially flat. The dollar is easing slightly while the yield on 10-year Treasuries dropped 4 basis points to 2.34%. Precious metals were not the beneficiary, however, as gold and silver were largely unchanged with platinum and palladium taking a slightly steeper hit.
Yesterday in the Markets
Thursday’s closing numbers:
Economic News Affecting Gold
Bad news keeps coming for oil-exporting countries and energy companies. Crude oil benchmarks did finally bounce from multi-year lows this morning, but expectations around the globe are for prices to continue to fall. The U.S. government is predicting an average gas price of $2.94 for 2015, which represents a dramatic 44-cent downward adjustment from last month’s forecast.
Plummeting oil prices have also been the main cause behind October’s big 1.3% drop in U.S. import prices. Export prices were also down 1%, largely due to an oversupply of agricultural products. While lower gas prices have been a boon for lower income households, retail sales in the U.S. were also strong, rising by 0.3% in October after a -0.3% drop in September. Not all of the economic news in the States was as rosy, however, as the budget deficit is up 34% from last October, currently sitting at $122 billion.
Geopolitical News Affecting Gold
Preliminary GDP numbers were released for the third quarter in Europe. Despite low expectations for the Eurozone, several economies saw modest growth. German 3Q GDP rose 0.1%, up 1.2% year-over-year. France also saw 0.3% growth in the third quarter while the EU Composite GDP rose 0.2%, or 0.8% year-over-year. Meanwhile, Italy’s economy continued to recede, as the Mediterranean nation saw its GDP fall by 0.1% last quarter. Italy’s economy has shrunk by 0.4% since this time last year, stoking concerns over deflationary trends holding down the European recovery.
In China, retail sales were up 11.5% year-over-year, just a hair below expectations set at 11.6%. Sales rose by 0.98% month-over-month. As the world’s two largest economies, China and the U.S. have similarly seen a mixed back of economic data that have at times shown signs of both strength and decline.
According to Bloomberg, the company Apple is now more valuable than the market capitalization of the entire Russian equities market. Russian stocks have lost nearly a third of their total value this year; meanwhile, Apple has grown in value by about 25%. In fact, Apple has surpassed the equities markets of Italy and Singapore, the world’s 18th and 17th largest markets, respectively. Russia remains the world’s 20th largest market despite the crumbling of its economy due to international sanctions. The drop in oil and palladium prices–two of Russia’s largest exports–aren’t helping matters, either.
In addition to the ongoing investigations into Forex manipulation being carried out by authorities in the U.S. and U.K., Swiss regulators are now opening criminal investigations of their own, targeting the conduct of individual traders involved in the Forex manipulation rather than the banks themselves. It would appear the Swiss authorities feel the $3.8 billion settlement yesterday was punishment enough for the big banks, but are determined to hold individual culprits accountable for the rigging of currency markets.
A quick update on the fight against ISIS: The Chairman of the Joint Chiefs of Staff, General Martin Dempsey, spoke at a congressional hearing on Thursday and indicated that some 80,000 competent troops will be required to stabilize the Iraq-Syria border and retake the territory controlled by ISIS. This comes after ISIS has called for its supporters to conduct attacks in Saudi Arabia, a development that has all the makings of a powder keg in the Middle East.
The FOMC meeting minutes will be released Wednesday of next week, as investors search for clues as to the Fed’s potential adjustments to monetary policy going into 2015. PPI figures are set to come out on Monday while CPI and manufacturing flash PMI will be announced on Thursday.