Market Action

• Despite continuing concerns about the vibrancy of the retail sector stocks posted a strong week, led by the Consumer Discretionary sector.
• Emerging markets are posed to record their first acceleration in growth in 2016 since 2010 according to a new research note published by Goldman Sachs. Emerging markets have been decimated this year thanks to the collapse in commodities prices and interest rate divergences with the U.S.
• Japanese exports fell for the first time in a year as the country posted weak trade data. Imports continue to come in below expectations as the country suffers from a dearth of demand. As a result the economy fell back into recession in Q3.
• The probability of a rate hike by the Fed reached 70% according to futures markets tanks to the publication of the latest minutes. A consensus seems to have emerged within the FOMC that the economic fundamentals warrant an increase. The yield curve has flattened as a result, with the short end rising and longer term bonds remaining stagnant.
• The SEC announced new rules intended to counter corporate inversion efforts, whereby a foreign firm domiciled in a low tax country purchases an American competitor. The tactic has risen in recent years as corporations explicitly begin stating the tax advantages with the approach. Pfizer’s CEO recently touted the potential savings when discussing the firm’s acquisition agreement with Allergan, an Irish company.
• Leaders committed to lifting global growth by an extra 2% by 2018 at the conclusion of the G20 meetings earlier this week. Leaders committed to supporting demand and initiating structural reforms.
• Italy, Lithuania, Austria and Spain are at risk of breaking EU rules with their current 2016 budget plans according to the European Commission. Profligate budgets were a major problem leading up to the Financial Crisis, as was the lack of enforcement.

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