Daily Market Report - 16/12/2014

Industrial production surged in November by the most since May 2010 as U.S. assembly lines churned out more consumer goods and business equipment, signalling manufacturing is bolstering economic growth. The 1.3 percent gain in output at factories, mines and utilities followed a 0.1 percent increase the prior month that was previously reported as a decline, figures from the Federal Reserve showed today in Washington. Manufacturing rose 1.1 percent, the most in nine months, and output at utilities was the strongest in almost eight years.

The Fed’s report showed the biggest gain in consumer-goods production in 16 years, indicating rising auto sales and a pick up in retail purchases are helping factories work through a slowdown in global markets. More hiring, slumping gasoline prices and a jump in confidence add to signs of improving household demand and sustained output.

Russia's central bank made a drastic interest rate move overnight, raising its key rate from 10.5% to 17%. The bank said the move was to try to ease the rouble's recent fall in value.

The rouble hit further record lows on Monday and Russian shares fell, hurt by investor concern about possible new U.S. sanctions over the Ukraine crisis.The Russian currency weakened beyond 59 roubles per dollar for the first time.At midday it was around 2.3 percent weaker at 59.53 against the dollar and 2.4 percent weaker at 74.04 versus the euro. A modest recovery in oil prices (oil bounced back from a five-and-a-half year low) prevented further loses. The sharp fall in oil has together with sanctions been the main cause of the rouble's over 45 percent slide against the dollar this year.

Russia's central bank said on Monday it had conducted $478 million worth of Forex market interventions on Dec. 11, taking the total the bank has spent defending the currency this month to almost $6 billion.
Last week’s interest rate rise failed to calm the situation. Analysts believe the scale of the slump could prompt the Kremlin into capital controls. Fears over companies’ ability to service their debts hit corporate bond prices today, and wiped over 6% off the RTS index of leading shares. 

India’s rupee slumped to an 11-month low as stocks declined and on speculation importers stepped up dollar purchases before the year end. Dollar demand from local oil companies to meet their year-end payments and a sell-off in equities is weighing on the rupee. The rupee is now starting to succumb to the stronger dollar sentiment as a combination of market participants reducing their long rupee exposure, together with thin liquidity, given we are nearing the end of the year, has exacerbated the moves.

Key Announcements:
GBP – 09:00: BOE’s Governor Carney Speech
GBP – 09:30: UK Consumer Price Index (Nov) expected to remain the same at 1.5%
EUR – 10:00: German ZEW Economic Sentiment Survery (Dec) expected to rise to 20
USD – 14:45:  Markit Manufacturing PMI expected to rise to 56.4

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