Client Login

Elections, Interest Rates & Debt Ceilings

The first day of Q4 was more sedate than the last of Q3. With stock and bond portfolios balanced, investors played a very reserved hand in the market, probably not wanting to be the first one to take a significant long or short position, for fear that the rest of the market is thinking something else.

In Europe; Mario Draghi says that growth is coming back and that it’s real. The head of the ECB says that “further integration is necessary to extract all the economies of scale and scope that our union brings” and, as much as is remit will allow, he “will not rest until our monetary union is complete”. There were no hints as to what he was planning in terms of additional QE during the speech, so very little in the way of market activity.

Staying with Europe; Portugal have a general election this weekend, which is being billed as a test for eurozone austerity. The current PM Coelho was responsible for the tough austerity decisions which has left many Portuguese a lot worse off over the last four or five years and was expected to be ousted by his socialist opponents. However, polls over the last few days have seen him surge back ahead on the back of positive economic data that shows the economy definitely has turned a corner. All eyes will be to Lisbon on Sunday night/ Monday morning.

The Telegraph are reporting that interest rates in the UK aren’t going anywhere until December of next year. ¬†They say the MPC have been given some breathing room by the Fed’s decision not to hike last month, but overall there aren’t the conditions to warrant a hike and, even when they do go, it won’t be a steep cycle. The article isn’t exactly revelationary, but in lieu of more interesting news, it’s worth a read!

One from the US; They’re going to hit their debt ceiling, again, around the 5th November. The seemingly perpetual problem of over extending their borrowing is coming at an interesting time, as I’m sure Donald Trump will have something particularly crass to say on the matter (probably laying the blame overseas somehow). Treasury Secretary Jack Lew has written to Congress to urge them to act swiftly and raise the limit, but we’ll see how that goes – Markets won’t react well to this being a drawn out debate/fight/mess.

Following on from this; A Zerohedge article entitled “there are five times more claims on dollars as dollars in existence” is well worth a read.

Today we’ve got non-farm payrolls data from the US, which should provide us with some volatility. Stock markets have opened higher, but so far currency markets are slow to get started following on from a very quiet and illiquid Asian session, as China are on holiday