Morning Commentary: Looking For Any Silver Lining

Foreign Exchange - Morning Commentary

Looking For Any Silver Lining

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Alan Rose
Alan Rose
Foreign Exchange Head Trader
It feels like markets have been in free-fall for weeks now with selling rippling through one asset class after another as markets are pricing in what they see as a new economic paradigm. Investors and traders have all made a rush for the exits as they anticipate a continued withdrawal of liquidity by the central banks, heightened trade tensions, and expectations for slower growth and weaker earnings ahead. Yesterday saw a second day in a row of a sharp sell-off in U.S. equities combined with a nearly 7 percent drop in the price of oil.
Markets are attempting to make a stand today against all the negativity with global equities (primarily Europe) rebounding along with the price of oil that rebounded by nearly 2 percent. The euro has rebounded off of yesterday’s lows as it appears the new Italian government is attempting to modify some of the provisions of their new budget to comply with EU demands for revisions. European stocks are all higher and Italian bond yields are lower.
It would appear the markets have priced in enough negative news for the time being. U.S. Durable Goods Orders were disappointing today (see below) and markets are taking the news in stride. Fed Chairman Powell will be speaking in New York next week and on Capitol Hill on December 5 prior to the December 19 Fed meeting. Markets are hopeful that Chairman Powell will find the appropriate words and inject some optimism to the conversation to calm the markets down and prevent another round of investor angst. Stay tuned.
  • U.S. Durable Goods Orders fell by 4.4 percent against expectations of a decline of 2.6 percent. With revisions, durable goods orders have now fallen for three straight months. Ex-transportation (Boeing orders, primarily) rose by 0.1 percent against expectations of a gain of 0.4 percent. Orders for civilian aircrafts dropped 21 percent while orders for military aircrafts plummeted by 59 percent. U.S. interest rates are flat and U.S. equities are opening higher.
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