Clarksville, TN – As expected, the European Central Bank (ECB) signaled that it would begin a quantitative easing program, purchasing €60 billion per month in public and private securities through September 2016.
The amount of monthly purchases was a bit higher than anticipated, but that included the ECB’s already-existing program to purchase asset-backed securities and covered bonds. The ECB’s announcement sent the euro sharply lower.
Austin Peay State University Department of Art to host lecture from internationally recognized artist Ann Hamilton
Clarksville, TN – The Austin Peay State University Department of Art is proud to welcome Ann Hamilton, an internationally recognized visual artist known for large-scale multimedia installations.
As a part of the Department’s visiting artist series, Hamilton will present a lecture on February 5th at 7:00pm in APSU’s Trahern Theatre.
Clarksville, TN – Investors remained concerned about the global economy. The Swiss National Bank abandoned its currency ceiling against the euro, generating turmoil in the foreign exchange markets and adding to investor anxiety in the U.S.
While the Swiss franc surged, the U.S. dollar gained further ground against other currencies and a flight to safety pushed yields on long-term Treasuries lower (the 30-year bond yield to an all-time low). The SNB’s move reflected the central bank’s inability to defend the ceiling (especially with the European Central Bank expected to embark on QE next week), but investors took it as a sign of global financial instability.
Clarksville, TN – The December Employment Report was strong, but with some conflicting details. Nonfarm payrolls rose by a greater-than-expected 252,000 (median forecast: +240,000), with a net revision to October and November of +50,000.
It was the strongest year for job growth since 1999 (and the strongest private-sector job growth since 1997). The unemployment rate fell to 5.6% (median forecast: 5.7%), with annual benchmark revisions making little difference – however, the drop in the unemployment rate was due entirely to a decrease in labor force participation (don’t read too much into that, seasonal adjustment is tricky in December).
Clarksville, TN – Two days before Christmas, the government revised its estimate of 3Q14 GDP growth sharply higher (to 5.0%, vs. +3.9% in the 2nd estimate). Most of the revision was in consumer spending (a 3.2% annual rate, vs. +2.2%), which accounts for 70% of the economy.
Moreover, the monthly figures through November suggest an even stronger pace of consumer spending growth in 4Q14 (4.0% to 4.5%). It’s not hard to do the consumer spending calculation (and the monthly figures are subject to revision), but the markets seemed not to fully reflect the improved consumer outlook.
Clarksville, TN – The stock market’s anxieties about oil prices, the Fed, and the rest of the world gave way to a renewed sense of optimism (or at least less pessimism).
Heading into the Federal Open Market Committee meeting, the key question was whether it would abandon the “considerable time” phrase. The FOMC had it both ways, removing the phrase, saying instead that it could “be patient” in deciding when to begin normalizing policy, but quickly adding that the intent is exactly the same.
Clarksville, TN – Retail sales figures for November were stronger than expected, while results for September and October were revised higher. The report suggests that consumer spending growth is on a moderately strong path in 4Q14 – and we aren’t even close to seeing the full impact of the drop in gasoline prices (expect a bigger benefit for the consumer in the first half of 2015).
The retail sales data did little to offset the negative mood in equities. A further sharp decline in crude oil prices added to the anxiety. A sustained drop in oil prices will be a significant negative for oil producers here and abroad.
Clarksville, TN – In recent weeks, the U.S. stock market has reacted negatively to bad economic news out of Japan, China, and the euro area and positively to efforts by the corresponding central banks to spur growth. The European Central Bank did not make that extra effort on Thursday.
After strong hints that quantitative easing is on the way, the ECB’s Governing Council disappointed by failing to launch QE. ECB President Draghi indicated that further extraordinary measures could be employed “if needed.” The ECB staff and euro systems have stepped up technical preparations for QE, but Draghi seemed to suggest that there is no haste toward QE.
Clarksville, TN – This week, the economic calendar picks up with fresh November figures. The focus is expected to be on the Employment Report, although the European Central Bank’s policy decision may be more critical.
ECB President Mario Draghi has repeatedly signaled that QE is on its way. Will the ECB pull the trigger this week? Seems likely (but if not, then in January).
Nonfarm payrolls were likely to have risen at a moderately strong pace, but seasonal adjustment could distort the figures (so take with a grain of salt).
Clarksville, TN – There are a few key financial market themes of the last several weeks. While the outlooks for the domestic economy and Federal Reserve policy are important, U.S. investors are sensitive to developments in the rest of the world.
Basically, poor economic news from the euro area, China, or Japan is a negative for U.S. equities, while any efforts by foreign central banks to address weakness are seen as a positive.
Japan posted a second quarterly decline in real GDP. Manufacturing gauges for the euro area and China were weak. The Bank of Japan extended its quantitative easing at the end of October.
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