Just two months after the OECD cut its global growth outlook, overnight the Organisation for Economic Co-operation and Development cut it again, taking down its US, Chinese, Japanese but mostly, Eurozone forecasts. In the report it said: “The Economic Outlook draws attention to a global economy stuck in low gear, with growth in trade and investment under-performing historic averages and diverging demand patterns across countries and regions, both in advanced and emerging economies. “We are far from being on the road to a healthy recovery. There is a growing risk of stagnation in the euro zone that could have impacts worldwide, while Japan has fallen into a technical recession,” OECD Secretary-General Angel Gurria said. “Furthermore, diverging monetary policies could lead to greater financial volatility for emerging economies, many of which have accumulated high levels of debt.” And sure enough, the OECD’s prescription: more Eurozone QE. As a result, futures in the US are in fresh all time high territory ignoring any potential spillover from last night’s Ferguson protests, just 30 points from Goldman’s latest 2015 S&P target, Stoxx is up 0.5%, while bond yields are lower as frontrunning of central bank bond purchases resumes. Oil is a fraction higher due to a note suggesting the Saudi’s are preparing for a bigger supply cut than expected, although as the note says “it is unclear if the cut sticks.”
RanSquawk’s summary of key “market” drivers:
European equities once again trade firmly in the green, with little in the way of fresh fundamental macro newsflow on offer. Nonetheless, the DAX enters the North American open at its highest level in 2 months, with heightened expectations of an ECB QE programme continuing to bolster price action. This has been enhanced by recent comments from ECB’s Coeure who said he wants the ECB to have an asset buying discussion next week, adding to the recent rhetoric from Draghi and Constancio. Furthermore, RBS are the latest bank to offer their insight on the situation by saying that it would be an oversight for Dec sovereign QE purchases to be ruled out. As such, financials are the outperforming sector, with the periphery also seeing outperformance as peripheral banks would be set to benefit the most from such action by the ECB. Fixed income products were initially seen in the green from the offset in a similar fashion however, Bunds have since pared their earlier gains in what has been a relatively choppy session for prices. However, they were provided some support alongside a modest bout of softness in European stocks after the OECD cut their global, US, Chinese, Japanese and Eurozone growth forecasts while leaving the UK’s on hold.
European stocks rise for 3rd day led by banks and carmakers, extending a 2-month high. Miners, oil & gas stocks underperform. Asian shares gain; U.S. stock index futures advance ahead of U.S. 3Q GDP. Euro falls against the dollar. Commodities gain, with silver outperforming, wheat underperforming. Brent oil, WTI crude advance.
Looking at the day ahead the calendar starts to kick into gear in the US this afternoon with the second snapshot of Q3 GDP, along with FHFA house price data, Case-Shiller house price prints, November consumer confidence and the Richmond Fed PMI for November. In terms of GDP, the market consensus is going for a 3.3% print, which is 0.2ppts lower from the initial reading.
Market Wrap:
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