World markets feeling festive over Fed’s Christmas boost

It’s been a turbulent week around the world, between plunging oil prices, a swinging ruble, and signs from the U.S. Fed of an earlier-than-expected rate hike. There’s more where that came from this morning, as an early, Fed-fuelled “Santa Rally” continues in Asia and Europe, and the ruble vacillates in the wake of a combative annual presser from Vladimir Putin. If you’re feeling out of breath, just hope for a quieter Christmas. Happy Friday!

The Day Ahead

The market rally continued yesterday, with the S&P 500 locking in its biggest gain in almost two years, while the Dow rose more than 400 points in a single day. In Canada, the TSX/S&P Composite had its third three-digit gain, putting it up 5.3 per cent from where it came in last year. Despite major volatility in oil prices and slowing growth in some of the world’s major economies, signs of a rate hike in the U.S. next year have given world markets some Christmas confidence after being battered by losses earlier this month.
Asia and the Pacific have had a strong trading day today, with the Fed’s statement still weighing out against slowing Chinese growth and a looming Russian financial crisis, while European markets have also started the day with a spring in their step. Of course, the ominous, looming question is just how long the festive surge will last.

Oil prices are still volatile – dropping to new five-and-a-half year lows yesterday. Despite the occasional bounce, including on Wednesday, like the Russian ruble, oil is still sitting in one general place: low. Although, at around 5 a.m. Toronto time, West Texas Intermediate was back above $55 – at US$55.15, while Brent was at $60.31.

The loonie also edged higher Thursday, closing above 86 cents.

What Canadians bought, and what it cost. Monthly numbers are out today from Statistics Canada on retail trade and the Consumer Price Index (CPI), which measures inflation. Retail trade has been up since earlier this year, rising again in September, particularly auto and auto parts sales. In the last release, CPI had risen 2.4 per cent in the 12 months to October, with higher food and housing prices leading widespread increases.
Yesterday brought numbers on Employment Insurance, which were largely unchanged in October – almost half a million Canadians are currently on EI. There will be a couple more numbers released next week, including GDP by industry, but expect the rest of the month to be pretty quiet.

 

What you missed

Putin compares Russia to a bear, says economic “situation” could last two years. The Russian president’s annual press conference yesterday was full of drama and bravado, even as the ruble has plunged in value and endured a series of wild swings in the past couple weeks. Putin’s presser was watched especially closely this year for all the obvious political reasons – Ukraine – as well as for signs of what he has in store to prop up the currency. The answer may be: not much. Putin told the Central Bank not to spend currency reserves on the ruble, and blamed the plunge on sanctions from the West, likening Russia to a bear the West is trying to chain, and saying: “As soon as they chain it, they’ll rip out its teeth and claws.” He also predicted that in the worst-case scenario, a recession could last two years. In the mean time, several retailers, including Apple, have halted sales, saying the ruble is too volatile to set prices, even as Russians have rushed to buy consumer goods that might hold value better than the currency. Volatility is expected to continue today – at about 5 a.m., the ruble was down three per cent.

As the ruble goes down, Switzerland tries to keep the franc from soaring. As the Russian currency plunged in value, the Swiss central bank announced a negative interest rate of 0.25 per cent yesterday – intended to prevent an influx of money as investors look for a safe haven amidts the currency storm. But Switzerland – known for mountains, stability, and above all, banks – has its own deflation worries to fight, and is trying to keep the franc from rising dramatically in value. Switzerland isn’t the only one to take the negative rate route: Sweden has also brought in a negative rate change. But it’s unclear if the move is enough: yesterday, the franc weakened on the news – and then started to strengthen again.

Do you want eggs with that? Yesterday Unilever – maker of the classic Hellman’s brand of mayonnaise – backed off from a legal challenge against an upstart, egg-free mayo-maker called Hampton Creek. The “Just Mayo” brand makes it’s mayonnaise without eggs, using instead a kind of pea – an ingredient change Unilever thinks should mean it doesn’t qualify as the real stuff. If you think your sandwich spread is small business, don’t laugh: the start-up has received major tech-world backing: it just completed a $90 million round of funding, with some of the investment coming from Facebook founder Eduardo Saverin. Unilever, for its part, remains the “world’s leading producer of food spreads”, according to FT.