Consumer Spending Boosts Wall St: Morning Market Update Dec 11

December 11th, 2014 by

Wall St. is grateful for a robust start to the 2014 holiday shopping season, as stocks in Asia and Europe drop. Low gas prices gave U.S. consumers a few extra bucks in their budget, just in time to take advantage of Christmas sales.

The cheerful news helped the bobbing dollar regain its footing, as crude oil stumbled from overnight levels.

Precious metals took a slight dip on the release of the consumer spending numbers, but all but gold pulled back into the green in late morning trading. Gold was still slightly under Wednesday’s close at 11am EST.

 

Yesterday in the Markets

Precious metals held on to Tuesday’s gains for the more part on Wednesday, while economic slowdown in China, the threat of Greece defaulting on its trillions in bailout money, and diving crude oil hammered equities.

Economic News Affecting Gold

First, the good: First-time jobless claims for last week dropped by 3,000, with only 294,000 people initiating claims for unemployment compensation. Consumer spending for November in the U.S. saved Wall St. from another day in the red, and also saved the dollar from further losses, but strength in the precious metals sector meant that any pressure from the news was only temporary.

It’s not only the very real possibility of Greece defaulting on its debt and leaving the EU that is weighing down European stocks. The European Central Bank had anticipated good demand for it’s “low interest emergency loans” to banks, with an eye it would relax credit markets. The banks, however, refused to bite. This puts more pressure on the ECB to start money-printing, which is what the banks really want.

The Russian Central Bank hiked interest rates a full 1.0% overnight, but the ruble just ignored the move to hit new lows. The Russian currency has lost 40% of its value since January. One outspoken forex analyst was quoted as calling the move “spineless,” saying the hike should have been at least 2% if the central bank was serious about supporting the ruble.

Rolling blackouts in South Africa pile on more woes for the country’s mining sector, including gold and PGM mines. Crumbling infrastructure of the state-owned power company is just one of the things that increase extraction costs.

Geopolitical News Affecting Gold

The halls of power in China continue to be shaken, as President Xi pushes the prosecution of formerly untouchable high Communist Party officials in his crackdown on corruption. Xi is using the campaign to install allies of his reform policies into senior government positions, The crackdown has had the affect of crashing the casino industry in Macao, which until now was a favorite way for influential Chinese to move money and have fun.

There’s a good chance that the anti-EU, anti-austerity candidate for president in Greece will win, which may very well end up with Greece repudiating its bailout loans from the EU and IMF, dropping the euro currency, and going back to the drachma.

Looking Ahead

looking-aheadTomorrow, we see industrial production and retail sales numbers out of China, consumer prices and industrial production from India, and producer prices and consumer sentiment in the U.S.

 

 

 

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