Tuesday, December 10, 2013

Volcker Rule Passes

The markets are lower this morning in early trading.  But the stair-step higher pattern we have seen most of the year is still well intact.  The controversial Volcker Rule looks to have passed, meaning banks won't be able to engage in propriety trading and can only hedge reasonable exposures.  It will be interesting to see how this is implemented.  But so far the financials are actually trading higher after CFTC commish Bart Chilton said it is unlikely to be implemented before 2015.

The dollar index has been declining the last couple of weeks, which is likely boosting commodities.  Gold prices haven't benefited as much, but are higher today near $1262.  Oil prices have moved up more recently and are now above the $98 level.

Asian markets ended mostly lower.  China's industrial production increased 10.0% and retail sales grew 13.7%, both in-line with estimates.  Japan's household confidence index rose to 42.5 from 41.2.  But Prime Minister Abe's popularity has suffered a 10.3 percentage point drop in the polls.

Europe's markets are most lower also, after weak industrial production numbers out of France and Italy.  Great Britain's data was strong again and it appears their economy is firming.  The FT reported that France and Germany are close to an agreement on the structure of the much debated European banking union.

The 10-year yield is lower today to 2.81%.  And the VIX is 5% higher so far to the 14.15 level.

Trading comment: In addition to the concerns about the Volcker Rule and its effect on the financial industry, there is also some chatter today that the Fed could begin their 'taper' this month.  We think that's still unlikely, as Bernanke is almost done with his term and waiting another month until Yellen takes over likely wouldn't make much of a difference.  But if the Fed were to start its taper this month, it would likely rattle the markets a bit and stocks would likely selloff short-term while bond yields could rise.


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