Global markets have stabilized a bit Thursday after Wednesday’s furious sell-off sparked by news of fresh policy measures in China and OPEC’s lowest output forecast in twelve years. US equity futures added 0.20% this morning after the biggest slide in almost seven weeks as US energy shares rebounded and Australia surprised with 42.7k new jobs last month, much above consensus. Foreign exchange markets were fairly quiet, the US dollar taking back some of yesterday’s losses ahead of November retail sales figures. US consumer spending rose 0.7% over last month as holiday spending kicked off in the US; retail sales have increased 5.1% over the same period in 2013.
Asian indices were slightly negative on Thursday, extending losses as commodity prices continue to weigh on shares worldwide as demand slows. Following yesterday’s sell-off in the US, Asian energy shares plunged, weighing on broad indices as oil prices touched $61 per barrel. The long bright spot across the Asian market – Aussie employment data – was not enough to boost markets as Chinese equities slid lower again, digesting rumors that authorities policy makers may need to boost their own stimulus to generate momentum in an otherwise sluggish economy. The Japanese yen was lower for the first time this week amid rampant speculation that Prime Minister Abe’s Liberal Democratic Party will win re-election this weekend and extend measures that have pushed the yen to 120 per dollar.
In Europe, shares were a sea of red as the ECB’s case for QE was boosted following news of a paltry long-term loan take-up. The European Central Bank’s second round of long-term loans came in at the low end of market estimates, further strengthening the case for the central bank to start large-scale QE. The ECB said it allotted 130 billion euros to EU banks at a fixed rate of 0.15%, estimates ranged from 90 billion to 250 billion euros. These LTROs play a key role in Chairman Draghi’s drive to revive the economy by injecting as much as 1 trillion euros in liquidity back into the system. Today’s poor result should fuel the debate among ECB members over whether the current “stimulus” is enough. The EUR/USD rate has declined by 0.50% as a result, putting short term technical support to test at highs from December 3rd and 8th.
US weekly jobless claims were 3k lower than last week as 294,000 new Americans filed for unemployment, in line with expectations. The US dollar was further boosted though as retailers show encouraging figures for November as holiday shopping is officially underway. The US dollar made further gains against its Canadian counterpart, which is once again trading near multi-year lows. Commodity prices and US performance continues to dive the Canadian dollar, as third tier housing data this morning showed another slight increase in housing prices for the hockey crazed nation, having no impact on the currency. Ahead of the weekend, foreign exchange markets should continue to be pushed around by swings in commodities and equities. Worldwide economic data is restricted tomorrow with euro area industrial production the headline.