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Market Brief, North America

Markets Enter Winter Freeze After Fed Minutes

Markets are struggling to dig themselves out of the snow this morning as a steady tightening in financial conditions threatens to cool global demand growth and weigh on corporate earnings. Yields inched higher and the dollar climbed after a record of the Federal Open Market Committee’s meeting at the beginning of the month, released yesterday, showed a “few” non-voters lobbying for a half-percentage-point interest rate hike, even as a quarter-point move garnered unanimous support from the core group. According to the minutes, “A number of participants observed that a policy stance that proved to be insufficiently restrictive could halt recent progress...

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Fire. Aim. Ready.

Investors are in a “sell first, ask questions later” kind of mood. Bond and equity markets suffered their worst day of the year yesterday amid speculation we have arrived at a “good as it gets” moment for the US economy, and risk aversion remains well entrenched – the dollar and yen are outperforming their rivals on safe-haven demand, commodity prices are down, and yields are up sharply. Consumer bellwethers Home Depot and Walmart issued disappointing outlooks, suggesting that prices could continue to increase even as sales volumes fall through the remainder of the year. Home Depot projected flat revenues for...

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Markets Retreat as Fed Minutes and Spending Data Loom

The dollar steamroller ground to a halt over the long weekend, but appears to be getting a small push from worsening risk sentiment as markets reopen this morning. Treasury yields are pushing higher, equity futures are down, oil prices are slumping, and risk-sensitive currencies are back on the defensive in foreign exchange markets. A surge in optimism among British businesses is lifting the pound. An update published this morning showed the S&P’s composite purchasing manager index climbing to 53 in early February from 48.3 in the prior month, firmly above the 50 threshold that separates expansion from contraction, and sufficient...

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Almighty Dollar Reigns Supreme

The greenback is reading its own obituary once again, defying early January’s almost-universally bearish sentiment to surge toward a six-week trade-weighted high. Data released yesterday showed initial jobless claims fell by 1,000 to a seasonally-adjusted 194,000 last week, pushing the four-week average to 189,500. Despite widespread fears of a slowdown, employers continue to add jobs at a pace consistent with strong economic growth, and laid-off workers are finding new roles quickly. This comes on top of a slew of data releases that point to robust growth and strong underlying inflation pressures in the US economy. Employers added more than half...

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Financial Conditions Tighten on Still-Robust US Consumer Demand

The three trading rules which have dominated for decades apparently remain intact: don’t fight the Fed, don’t bet against the dollar, and never, ever underestimate the US consumer. Retail sales rose at the fastest pace in two years in January, providing more evidence that aggregate demand in the American economy isn’t slowing as much as the Federal Reserve might prefer. Overall retail receipts climbed a seasonally adjusted 3 percent in January, snapping back from declines in November and December as consumers spent more on cars, clothing, and eating out. This comes after earlier reports showing that more than half a...

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