Third week in November

The week ended with US equities rising for the fourth straight week, as the S&P 500 finished up 0.4%. The FTSE 100 also had a good week rising 1.3%, Europe brought up the rear finishing the week pretty much as it started. The Nikkei had another good week, rising over 3.5% as the yen continues to slide against the US dollar. The fall in the price of crude oil that continues to make headlines carried on last week as the Brent Crude price traded below $80 a barrel for the first time since 2010. Gold in contrast, which can often track the oil price finished the week slightly higher closing at $1190 an ounce.

The fall in the oil price continued to show signs of boosting the US economy as data on Friday reported that US retail sales rose 0.3% in October, following a dip in September.

On Friday we also received the latest eurozone economic data, and unlike the US the eurozone economy remains lackluster. GDP across the region grew at 0.2% for the third quarter of the year, slightly higher than had been expected. The latest Bank of England inflation report seemed to push back interest rate expectations as the two-year yield fell 8 basis points on the week, ending the week at 0.57 percent.

Equity sentiment that appeared to be on the floor in the middle of October now seems to be showing signs of a little greed creeping in. The AAII US retail investor sentiment index released on Thursday reported 57% of those polled believe the markets will be higher in 6 months time. The last time a reading of this level came in was December 2010. The AAII sentiment indicator is often used as a contra indicator, but in 2010 encouragingly equities continued to climb into the year-end. After the previous two weeks of strong inflows into equities, this was another robust week with inflows of $7bn. The Vix closed at 13 on Friday, pretty much where it started the week. 

We commented this week that the fall in the gold price might see some of the bulls capitulating, For the 11th week out of 12 precious metals have seen outflows. 

When we turn to the week ahead, on Monday Mario Draghi has the Quarterly Hearing before the Committee on Economic and Monetary affairs, at the European Parliament.

As usual, there is a constant stream of data coming out of the US this week. The highlights will probably be Monday’s latest industrial production report, and on Wednesday we get the release of the latest Federal Open Market Committee minutes from their last interest rate meeting.

For the UK the features will be on Tuesday as we get the latest inflation data and on Wednesday the release of the MPC meeting minutes. Once again we will see if the two dissenters continue to vote for a rate rise, or whether the latest inflation report has also dampened their enthusiasm for a rate hike.

Posted on November 16, 2014 .