Market Digest – Week Ending 11/14
Capital markets were quiet this week. Global stocks traded in a narrow range and finished little changed for the week. Oil prices continued to plummet, sending domestic crude below $75 a barrel for the first time in four years. Many analysts predict supply will start to be curtailed if prices drop below $70. Relations between Russia and the West deteriorated amid reports of new Russian troop and equipment movement into Eastern Ukraine. Q3 Eurozone GDP was again soft, but exceeded expectations and had little impact on markets.
S&P 500: 2,040 (+0.4%)
FTSE All-World ex-US: (+0.9%)
US 10 Year Treasury Yield: 2.32% (+0.02%)
Gold: $1,189 (+1.5%)
USD/EUR: $1.252 (+0.6%)
- Monday – China announced a “Shanghai-Hong Kong Stock Connect” program which will allow greater access for international investors to its stock market.
- Monday – Bill Gross’s new fund at Janus attracted $430 million since his arrival, less than 1% of the outflows from PIMCO.
- Monday – The US Postal Service said up to 800,000 people could be impacted by a systems breach which may have compromised names and Social Security numbers.
- Tuesday – China and the US reached a number of accords on environmental issues, tourist visas and increased communication to avoid military tensions.
- Wednesday – NATO said Russia is sending new troops and tanks into Ukraine.
- Thursday – Six banks, including Citigroup and JP Morgan agreed to pay $4.3 billion related to currency trade manipulation allegations.
- Thursday – Baker Hughes confirmed it was in preliminary talks to be acquired by Halliburton.
- Friday – Eurozone GDP grew at a 0.6% annualized rate in the third quarter, modestly ahead of expectations.
In springtime, when the crisis in Ukraine flared up and Russia began the process of annexing Crimea, stock markets were highly reactive to events in the region. Over time, investors seem to have concluded Ukraine is not important. Recent reports of Russian troops and tanks filing into Ukraine have had little impact on stocks or Treasuries (which earlier in the year had acted as a safe-haven and rallied when fears of conflict spiked).
Things are not going well in Russia. The plummeting price of oil is hurting the country badly, and earlier sanctions are not helping either. The Ruble has declined by 30% relative to the dollar, which could mean rising prices for ordinary Russians. Whether this leads Putin to act more conservatively or assertively is completely unknown.
World leaders from the G-20 meet this weekend in Australia. Ukraine is expected to be largely avoided as a topic, but Putin may force the world to refocus attention there before long. An invasion of Eastern Ukraine seems increasingly likely. If it happens, we’d expect markets will take notice. This isn’t reason alone to abandon stocks or load up on Treasuries, but the calm which returned to markets this week may be short lived.