Happy holidays! Love, the American economy

Your financial and economic news for Christmas Eve!


It’s a record-breaking Christmas for the U.S., as American markets hit record highs yesterday following third-quarter GDP numbers that showed the strongest growth in more than a decade. In the rest of the world, today was a quieter day – with markets closing at midday in Asia, the Pacific and Europe. Of course, Canadian and U.S. markets will be closed tomorrow and Boxing Day, and again on New Years Day.

This is also the last Morning Playbook for the year. See you in 2015, and Merry Christmas!

The Day Ahead

The Dow and S&P 500 hit all-time highs – again, as U.S. markets rallied for the fifth straight day and pushed beyond records set just yesterday. The jump came on news that the third-quarter saw stronger than expected growth, while markets are still jumping from last week’s comments from the Federal Treasury on a “patient” approach to a rate hike expected for next year. In Canada, the TSX/S&P index also saw a three-digit gain, rising 0.2 per cent, after dipping slightly yesterday.

Markets in Asia, many of which closed at midday, took a slight sparkle from the day in New York, but ended on a mixed note with Australia’s main index up, Hong Kong’s flat and Singapore’s down. European markets, which just closed, also had a subdued half-day, with the FTSE 100 up by 0.2 per cent, while the european index closed flat.

The loonie perked up yesterday on good GDP numbers for October, closing the day just below 86 cents at 85.98 cents. The greenback, for its part, was at its strongest in more than eight years.

Up yesterday, down again today. After perking up slightly yesterday, oil prices are falling again this morning – just before 9 a.m. Toronto time, the U.S. benchmark, West Texas Intermediate, was at US$55.94, while the global benchmark was at US$60.15. Despite signs of a strong U.S. economy, OPEC has been uncompromising in recent days over letting prices fall, with the Saudi oil minister reaffirming that they don’t plan to cut production.

What You Missed

Strong Canadian growth for October, with the economy growing by 0.3 per cent – above expectations – according to Stats Canada. The gains came mainly from oil and gas, mining and manufacturing, and could be a sign of better than expected growth for the fourth quarter of 2014, even as provinces reassess their finances for next year in light of oil’s plunge.

U.S. growth at its fastest rate in 11 years, after the Department of Commerce announced a 5 per cent annual pace of growth in the third quarter. The rate was far better than expected, even amidst strong numbers for the American economy in recent months. While overshadowed by strong growth, sales for durable goods – which can give a hint of the strength of the economy to come – fell 0.7 per cent in November, leaving some questions about how growth will fare in the final quarter. On the other hand, numbers from this number showed that jobless claims decreased by 9,000 last week alone from the week before, another sign that the American labour market is doing well.

On the other side of U.S. numbers, however, were emerging markets. Twenty-two emerging currencies, from Brazil to Hungary, weakened against the greenback according to Bloomberg, as an equities surge pushed by the Fed’s pledge to wait on interest rate hikes faltered on worries that the strong American numbers would shorten the wait.

The ruble is relaxing – as Moscow pulls out all the stops. After the Russian currency endured massive drops in value in the last couple weeks, the Kremlin has managed to keep the ruble’s value flat so far today, with a little help from the Fed’s announcement. Emergency measures have ranged from hiking Russian rates to 17 per cent, money for ailing banks, telling state-owned exporters to sell their foreign currency, and promising to lend banks foreign currency as collateral for loans just this morning. But the calm may not prevail over the holidays: yesterday, S&P threatened to lower Russia’s credit rating to junk status, as a former finance minister warned the country wasn’t headed for just a recession, but a full-fledged financial crisis.

Uber proves it’s a magnet for controversy, again the company apologized for hiking fares during the Sydney Siege last week – by as much as 400 per cent. The price bump was a result of the taxi-disrupter’s surge pricing model, which prices on demand, but the company now says it should have suspended the system as Sydneysiders scrambled for a taxi during the hostage-taking, and promised to refund affected fares. In the U.S., the driving service has an agreement to suspend the pricing system during major emergencies.
Meanwhile, just this morning, South Korea declared Uber an illegal taxi service, formally charging the company’s chief executive. The app has also recently been suspended in Spain, and has also been suspended in New Delhi, over claims that a driver sexually assaulted a customer.

A last-minute gift for the money launderer in your life. When handing over yet another iTunes gift card for that hard-to-shop-for boss, son-in-law, or teenaged daughter, you may wonder whether the effort was truly appreciated. But for your local low-level criminal (or even your local organized crime cartel), you couldn’t find a better gift, according to the Globe. Difficult to trace and often easily exchangeable for cash, gift cards are being used more and more frequently as a way to turn around dirty cash. And since they’re not money instruments, gift cards don’t have to be reported by banks or declared at the border – at least for now.

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