Market Talk- October 11th, 2017

By reading the FED minutes, the officials outlined plans for a December rate hike as well a further 3 rate hikes next year. This was not a real surprise; the Fed funds estimate of 77% for a 25bp hike prior to minutes being released. The FOMC officials outlined they had deep concerns over the low inflationary environment and how long it will remain. This uncertainty caused the Dollar to weaken. The USD as measured by the DXY index, lost 34bps with the EURUSD as of the time of writing reaching 1.186. We must note there is significant short-term resistance around this region of 1.18-1.19 and a closing above this level could produce further strengthening ahead for the Euro. Check Socrates for more detailed key weekly and monthly reversals to determine the next areas of support and resistance. The FOMC officials estimated the fed funds rate to be at 1.4% by the end of the year and the median fund rate to be 2.1% by the end of 2018.
Little price activity in the European stock markets even with the Euro strengthening 45bps against the dollar. The Dax was the main performer but only gained 17bps. CAC 40, FTSE and SMI all remain flat.
In Asia the Hang Seng dropped 34 bps, we have seen this pattern for the last few days at it is nearing all-time highs. The Shanghai Composite and the Nikkei 225 both were slightly positive gaining 16 and 28 bps respectively.
The Major US markets, all made positive returns and all-time highs – the current bull market is 103 months old, making this the second longest not far behind the longest (1949-1961). Today’s gains was slightly offset by the loss of the Dollar for those international investors.
Oil was up 77bps ahead of the EIA report tomorrow. Brent closed 3 dollars shy of its 52-week high. Agriculture didn’t have the same fate, with corn close to the 52 week low and wheat down 1% and 46bps respectively.

The FOMC minutes did not come as a surprise as the US Government 10yr bond remained steady with the yield reducing by 2bps. Swiss 10yr and UK Gilts remain unchanged. With the Eurozone on average increasing by 1bps.
Tomorrow we look to ECB’s Draghi speech (10:30am GMT-4), during the last speech he also described a low inflationary environment for the Euro Zone, but indicated that they are confident inflation will eventually head in line with their inflationary aims. We expect much of the same talk tomorrow. The US PPI numbers will be announced as well as EIA crude oil inventories.

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