Daily Market Report - 23/12/2014

The Bank of England’s financial policy committee said yesterday that it’s worried that the fall in crude prices could fuel geopolitical risks. They also point out it could also drive the Eurozone closer to deflation. This is relevant in many economies in Eurozone where core inflation is already weak. Low headline readings would further depress expectations of future inflation. This, in turn, could result in slower rates of growth of nominal incomes, increasing the burden of existing debts.

The US housing market recovery is starting to look a little rocky. After two consecutive months of increases, sales of existing homes fell to a six month low in November. The National Association of Realtors said they dropped 6.1% to an annual rate of 4.93m units. The forecast was a figure of 5.2m. October’s sales rise was revised slightly down from 5.26m units to 5.25m.

Consumer confidence in the Eurozone came in slightly better than expected yesterday, although still in negative territory. According to an initial estimate from the European Commission, consumer confidence in the eurozone rose to -10.9 from a revised -11.5 in November. Analysts had been expecting a figure of -11.

Russia’s immediate financial crisis eased a little today; the rouble has strengthened by almost 6%, and the Russian stock market jumped by 8%. However Russia’s unfolding financial crisis has claimed its first victim. Mid-size lender Trust Bank is being bailed out with 30bn roubles from the Central Bank of the Russian Federation. It appears that, during the good times, Trust offered attractive savings rates and consumer loans. That helped it expand while the Russian economy was ticking along. But the rouble crisis, and the shock caused by Western sanctions, has hit demand for credit and left some borrowers unable to repay their debts.

Key Announcements:

GBP - 09:30 - GDP (YoY) expected to fall to 3% from 3.2%
USD - 13:30 - GDP Annualised  expected to fall to 4.1%  from 4.6%
USD - 13:30 - US Durable Goods orders (Nov) expected to rise 1.8% from 0.4%

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