Morning Update – 05/11/15 – 07:50:21

November 5, 2015 by

Morning all.. Wall St slid as the weight of the higher dollar and falling oil prices finally proved too much with the S&P finally closing down 0.35%. Yellen seemed to keep the threat of a December hike alive and data yesterday supported that. This places emphasis on forthcoming data, with risks likely asymmetric in wake of increased hawkishness. Strength would simply reinforce existing expectation for an earlier lift-off, but weakness could undercut USD on a decline in yields. Interruption to equity uptrend could signal more broad based USD appreciation than seen to date. Yellen’s hawkish remarks sent 2-year US yields to their highest since April 2011, the Dollar up +0.82%, commodities lower (WTI -3.30%) and the probability of a rate hike next month to 58% from 50% the day before. Those comments were then backed up at the end of the US session by NY Fed President Dudley who said that he fully agrees with the view of Yellen that December is a live possibility. Despite that weaker showing for risk assets last night, the news this morning is of a strong session for Chinese equities with the Shanghai Comp (+2.81%) technically entering a bull market having now risen over 20% from the August 26th lows. The CSI 300 is up over 3% despite there appearing to be little in the way of new news out. Markets in Japan have seen reasonable gains also with the Nikkeiup 1.0%. As London starts we are seeing dollar buying again. The focus now turns to the UK and the BoE. It is “super Thursday” where we get the latest interest rate decision; minutes of the latest Monetary Policy Committee meeting, including the voting breakdown; the quarterly inflation report, which includes updated forecasts and commentary on the BoE’s latest thinking on the outlook for the economy; and a press conference from the BoE governor, Mark Carney. For good measure, tacked on this month is the release of an assessment from the BoE’s in-house watchdog the Independent Evaluation Office of the institution’s forecasting performance. This will trump most other issues this morning.. Good luck.