Huge Week for Data Actually Lived Up to the Hype

Data releases across the globe last week lived up to expectations. This week's note summarizes three events: 1) OPEC’s meeting on oil production 2) the European Central Bank’s (ECB) monetary policy meeting and 3) the Non-Farm Payroll data release in the U.S. OPEC announced late last week it would keep its pumping quotas unchanged despite an oil glut that is keeping prices below $45 a blue barrel (just above the six-year low). The world continues to produce two million barrels more per day than it consumes. With Iran announcing it will boost production by upwards of one million barrels per day as soon as trade sanctions are lifted, oil prices seem likely to remain low for the foreseeable future. Low oil prices weigh on headline inflation measures, particularly in the U.S. and Europe. Last week, Mario Draghi, head of the ECB, failed to increase the monthly purchase amount of the current stimulus package, telling the markets, "Our Stimulus is working." The Euro gyrated by the third largest amount ever in response to Draghi's announcement, correcting what the market widely predicted would be an early Christmas present of further quantitative easing. In contrast, prognostications surrounding whether the United States' Federal Reserve would increase interest rates this month strengthened after a strong Non-Farm Payroll report released by the Labor Department. The U.S. added 211 thousand jobs in November and an average of 218 thousand over the past three months (when factoring in thirty-five thousand jobs included in the upward revisions of the prior two months). One economist wrote that the debate now shifts from when the next rate increase will be, December having solidified, to how fast successive hikes will take place. The U.S. outlook continues to brighten, while the rest of the world remains less certain. The next major event is the Fed's decision next week on whether or not to raise interest rates for the first time in nine years. If they disappoint and do not take action, we could experience market volatility that makes last week's highly unusual moves seem modest by comparison. 

Sources: Bloomberg, WSJ, Guardian, Deutsche Bank, Reuters, SNWAM Research