Risk off returned following Thursday’s FOMC statement - ANZ

In a market wrap, analysts at ANZ Bank New Zealand Limited explained that the risk off returned to close last week following Thursday’s FOMC statement.

Key Quotes:

"Markets are pricing in a 25bp hike in December, with data flow suggesting pipeline inflation pressures are building. The S&P was down 0.9%, led by technology as soft earnings reports weighed. The Nasdaq fell 1.6%. In Europe, the DAX was unchanged, while the CAC 40 and FTSE fell 0.5%. US treasury yields fell (10-year to 3.18%) and USD and JPY were bid. GBP underperformed on Brexit headlines. Oil continued to push lower, with WTI falling 0.9% to be down 21% from its October high. Supply-side surprises appear to be the main culprit, but concern that global demand is slowing may also be creeping into markets and weighing on risk appetite more broadly."

Going up:

"US October PPI came in stronger than expected at 0.6% m/m (2.9% y/y), with core at 0.5% m/m (2.6% y/y). That was the biggest gain since September 2012. The data support the latest FOMC statement that further gradual rate rises are required. Meanwhile, November preliminary University of Michigan consumer sentiment was 98.3, little changed from October's 98.6. At 2.6%, 5-10 year inflation expectations rose towards the upper end of the range that’s prevailed since June 2016 (last: 2.4%)."

Solid:

"The 0.6% q/q rise in Q3 UK GDP was supported by broad based growth. Household spending rose 0.5% q/q, services rose 0.4% and business investment rose a surprising strong 1.2% given all the Brexit uncertainty. Exports rose 2.7% q/q. Growth is at potential (1.5% y/y) and consistent with core inflation settling around the 2% target (currently 1.9% y/y). The BoE will remain vigilant in this climate especially as wages (3.1% y/y) are getting traction amid growing reports of skilled shortages."

Regression: 

"French September industrial production data disappointed, falling 1.8% m/m, with transport leading declines, down 3.8% m/m and weakness evident elsewhere (ie mining down 1.8%). Meanwhile, October manufacturing PMI fell to 51.2 (last: 52.5) implying no near-term recovery. The data releases highlight downside risks to next month's updated macroeconomic projections from the ECB and very benign forward guidance."