Market Action

  • Markets experienced their most turbulent week since the decline of mid-October. Going back to December 9th the Dow Jones lost close to 5% in the span of a week. Reasons for the decline are not entirely clear but talk of illiquidity, especially in corporate debt markets, seem to be a culprit. Thanks to the Fed’s professed “patience” in raising rates in the future the market surged back to rise overall.
  • Shinzo Abe’s third electoral victory spurred a rise in the Nikkei early this week. The Prime Minister’s resounding victory gives him the ability to surpass a more contentious upper house and pursue his reforms.
  • The decline of the ruble was at the forefront of economic news and commentary this week. Russia’s currency reached all-time lows, with the dollar buying 80 rubles at one point on Wednesday. Russia’s central bank raised rates 6.5% to 17% the same day and some foreign exchange brokers canceled the trade of rubles.
  • President Putin blamed Russia’s ills on foreign forces and stated it may take two years for Russia to escape its dire situation.
  • Bank of England Governor Mark Carney stated concerns that Russia’s troubles would spark contagion in other Emerging Markets. Contagion fears are already gripping firms such as Societe Generale and ING, financial institutions with considerable exposure to Russia. CDS rates on the companies have risen in recent days.
  • A Reuters poll found that 2/3 of economists expects China to lower rates by 25 bps by March of next year.
  • Goldman Sachs stated that it expects to see additional weakness in the Australian dollar going forward into 2015. The currency has been one of the worst performing over the past six weeks.
  • Switzerland’s central bank imposed a negative deposit rate this week, following in the steps of the ECB. The move is aimed at preventing the franc from rising and harming the nation’s competitiveness. Sweden is said o be contemplating a similar maneuver to try and escape deflation.

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