ECB Stands Pat : Morning Market Update Dec 4

December 4th, 2014 by

The European Central Bank and its president Mario Draghi are the market movers this morning. The ECB kept interest rates at historic lows, but demurred from initiating Fed-style bond purchases with newly-printed money.

The news pulled the euro off a two-year low, which depressed the dollar. Gold spiked to $1,215/oz during Draghi’s press conference, which sparked profit-taking that moved prices back to previous levels.

At 10am EST, gold was flat at $1,210/oz, silver was up nearly 1% to $16.56, Platinum was up 1.4%, gaining $17.00/oz, while palladium was up a half-percent to $798.

Wall St. opened lower, despite an improvement in first-time jobless claims, but the Nasdaq quickly gained positive territory. Asian stocks were up on speculation of more stimulus from China and Japan, while European stocks fell after the ECB didn’t begin quantitative easing.

Yesterday in the Markets

While the ADP private sector payrolls report disappointed, Wall St was still able close higher. The DJIA and S&P 500 both set new records on modest gains. Treasuries were mostly steady, with the yield on the ten-year note dropping 1 basis point.

Gold gained almost 1% to close just under $1,210 an ounce. Silver and palladium finished modestly lower, while platinum saw a $9 gain to finish at $1,221.

Wednesday’s closing numbers:

Dow:17,912.36+32.81+0.18%
S&P 500:2,074.24+7.69+0.37%
Nasdaq:4,774.47+18.66+0.39%
DXY:88.9570+0.3100+0.35%
Gold:$1,209.60+$11.10 +0.93%
Silver:$16.43-$0.04 -0.21%
Platinum:$1,221.00+$9.00+0.74%
Palladium:$794.00-$7.00 -0.87%

Economic News Affecting Gold

raining-euros-from-skyBank stimulus is the story of the day, as markets addicted to easy money look for a new pusher now that the Fed has stopped money printing. Opinion polls in Japan show prime minister Abe’s coalition gaining support ahead of snap elections, which is seen by markets as an indicator of new stimulus measures. Chinese investors are looking toward the Xi government to announce more stimulus measures as well, to increase liquidity in the markets.

European stocks were disappointed that the ECB did not announce a bond-buying program at their policy meeting today, but the majority of the board think that they have no yet given recent measures enough time to work yet.

First-time jobless claims in the U.S. fell by 17,000 to show 297,000 newly-unemployed people filed for benefits. Analysts had expected a slightly lower 295,000 claims. This erases the 18,000 jump from the previous week, but analysts warn that the numbers may have been artificially deflated due to government offices being closed for Thanksgiving.

Crude oil was hanging on near $70 a barrel yesterday, until Saudi Arabia torpedoed prices with the information that the kingdom sees oil dropping to $60 a barrel before recovering. Bloomberg reports that shale oil in the U.S. is now selling for under $50 a barrel.

A burning ruble

President Putin of Russia made an address to the nation today, and the ruble sank in real-time the more he spoke. He blamed “enemies” of wanting to destroy Russia, claimed that Crimea was “sacred territory,” and publicly begged the country’s oligarchs to bring their overseas millions home with no questions asked, announcing a financial amnesty regarding repatriated money.

In a warning to “too big to fail banks,” the chairman of the British Bankers Association warns big banks to shape up, or the UK government will break them up. Anger and exasperation over non-repentant attitudes in the City is growing, as the mega-banks simply treat the fines for illegal market manipulation as a cost of doing business, and refuse to change their behavior. Could we actually see bankers behind bars in the future?

Geopolitical News Affecting Gold

Video footage was released yesterday of Iranian Air Force F4 Phantom jets striking ISIS positions near the Iran/Iraq border, in cooperation with an Iraqi Army/Peshmerga offensive to reclaim border towns from the terrorist army. The American-made fighter-bombers were purchased by the Shah of Iran, before he was overthrown in the 1979 revolution.

Political upheaval seems to be spreading, as the Swedish government was dissolved and snap elections scheduled for March. A right-wing political party refused to approve the government’s budget, holding it hostage to anti-immigration demands that were not met. The U.S. may be seeing the same situation (minus the snap elections) as Tea Party Congressmen threaten a government shutdown if measures to reverse (or at least defund) Obama’s executive order giving amnesty to illegal immigrants are not included. The stopgap spending bill that was passed to get the nation through mid-term elections expires on Dec 11.

Economic problems have brought down the Netanyahu government in Israel, with elections called for March. The Israeli economy saw notable damage during the war in the Gaza Strip earlier this year, which pretty much canceled the summer tourist season, and led some large fund to divest themselves of holdings in Israeli companies.

Things are much worse in Venezuela, where the government has arrested a major opposition leader, and charged her with plotting to assassinate President Maduro. She claims it is all a fabrication to get her off the streets, where she has been leading anti-government protests over food shortages, unemployment, and corruption.

Food riots may become more frequent, as this infographic on “Peak Population” from Visual Capitalist explains.

Looking Ahead

looking-aheadTomorrow, all eyes will be on the U.S. government’s non-farm payrolls report for November. This is considered a large component in the formula the Fed uses to determine when to raise interest rates.

Also on tap are U.S. trade balance reports and factory orders. The EU is bracing for the composite GDP report for the region.

 

 

 

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