1) BOJ policy meeting overnight where rates and QE left unchanged Summary from Reuters “-BoJ’s Kuroda (Press Conference): Japanese economy will grow above it’s potential from now on; inflation expectations weakening; will adjust policy to maintain inf towards 2% tgt; continuing with easing most appropriate for achieving 2% tgt; not ruling out debt purchases in any maturity; doesn’t think Yen has weakened significantly – will debate yen impact at nxt meeting; LT JGB tgt not a cap or a floor – is ~0%; ETF purchases are necessary to achieve their 2% inflation tgt; not expecting yen weakness ahead
My take away “Will discuss yen at next meeting” it is getting too weak now. Economy improving but Inflation still slow to increase. NKY Closed higher by .5%, Yen lower by 64 tick’s futures and JGBs yields lower across the curve with the long end showing biggest declines down 6Bps.
2) German PPI turned positive on an M/M basis for the first time since June 2013.PPI increases are associated with “reflation trade” market needs to see if this is a blip or a trend. Regardless of the strong PPi Euro down 47 ticks, below last weeks lows and trading closer to 102 handle. In a Thin holiday market the path of least resistance is lower for Euro.1 week Vols lower but 1 month, capturing next ECB meeting have blipped higher. Yield spreads between Germany/USA also supporting Dollar. Next target for Euro 103.Bunds are steady volume in the complex has been lower compared to prior day for 4 days in a row. German Finance agency said Germany will not sell a 50 year bond in 2017.This has given Buxl a small lift.
3) Deutsche bank said it will be decreasing the size of its Derivatives book (per Bloomberg). No time frame given but any inexplicable move in prices will now be blamed on DB unwinding its Book.
Stronger dollar having an impact on all commodities with the exception of oil as markets leaning towards a possible hefty draw in today/tomorrows storage numbers. Yesterday’s string of terrorist attacks did nothing to dent the rally in stocks and we see that continuing today. There was some type of incident in Jordan overnight but again market has ignored it. GBP -65 ticks even with a retail sales number that beat expectations.
• No economic releases today
• No fed speakers till the New year
• Soybeans may finally be breaking out to downside trading at lowest levels in 3 weeks
• Average to above average temps predicted for end of month are weighing on nat gas