A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Risk assets including West Texas Intermediate crude oil are ramping higher while the Swiss have said "thanks, but no thanks" to foreign capital inflows
There are enough global growth fears – highlighted by the collapse in a number of commodity prices – that for now, I will classify this Santa Claus rally as merely a recovery from oversold levels.
For investors, the importance of Switzerland announcing negative interest rates on commercial bank deposits – you get less money back the longer you leave the money with the bank – is that it should provide a boost to the U.S. dollar which is now left as one of the few options for foreign (ie. Russian) assets looking for a safe haven.
"Swiss National Bank starts negative interest rate of 0.25 per cent to stave off inflows" – Bloomberg
"SNB's Jordan says they are committed to purchasing unlimited quantities of FX to enforce cap" – forexlive
The Atlantic's Quartz business site quotes Goldman Sachs research showing that shale energy producers are becoming steadily more efficient and might not need crude prices at the high levels most assume necessary for profitability:
"As major producers cut back on drilling, that leads to lower fees for rigs, rig workers, and other services. That means drillers 'can spend less to get the same or potentially even more in terms of production,' Goldman Sachs said in a note to clients. The declining cost trend has only begun, but already rig rates are down 15 per cent to 20 per cent, according to Goldman."
"Why $60 a barrel oil is the new $75" – Quartz
Also from Bloomberg, a useful reminder that currency upheaval has been an annual event in emerging markets. Oliver Renick writes, "This year's four-month selloff is drawing comparisons to 1998, when the developing-country gauge lost almost two-thirds of its value as Russia listed toward default and currencies slid. The flashback reflects a cognitive habit known to behavioral economists as the availability heuristic…
Even while the current plunge in oil prices harkens back to 1998, when losses in the commodity drove crude exporters Russia and Venezuela into financial crisis, emerging market stocks have actually lost a little less than they did during declines in the previous four years."
"It's usually 1998 in emerging equities " – Bloomberg
U.S. Federal Reserve chair Janet Yellen's comments at Wednesday's press conference suggest the central bank will raise interest rates in April of 2015. Deutsche Bank economists remain skeptical, noting that "the market has [wrongly] predicted rate hikes every year for the past five years" and they have a chart to prove it.
Frances Coppola is becoming one of my favourite economic pundits. In a recent post, the U.K.-based Ms. Coppola explains "the most beautiful equation in economics" which includes some important perspective on government debt, namely that "every government deficit is by definition also a private surplus."
"Be careful what you wish for, Mr. Cameron" – Frances Coppola
Tweet of the Day (on shale drilling profitability): "@bysamro Bloomberg targeting a very specific demo with the skitching mobile.bloomberg.com/news/2014-12-1… pic.twitter.com/mDI8cteuCR
Diversion: I disagree with much of this – my list would be headed by Rectify, Penny Dreadful and House of Lies – but it's a good survey nonetheless.
"The 10 Best TV Shows of 2014" – Grantland
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow