White House officials indicated last night that President Obama is set to announce Janet Yellen as the new Federal Reserve Chairman nominee. She is expected to be confirmed in the Senate. Markets took on a bit of a risk-on tone, but very muted in comparison to the rally after Larry Summers pulled out of the running.
- Obama Set to Announce Yellen as Fed Nominee at 3 p.m. EDT – Perhaps the most telling aspect of the announcement from a market perspective was the muted reaction. SPX futures are only higher by about 4 points. In fact, I’ll discuss the surprising moves in global asset prices overnight in my Macro Wrap today.
- Asian Equity Indices Mostly Higher After Red Open – Dip Stock buyers became more aggressive after the Yellen news. Japan was the leader, up 1%, while the Hang Seng underperformed, down 0.65%. The emerging market stocks that got hit hard in late September (India, Indonesia, Thailand) have been more resilient than developed market stocks in October so far.
- European Stock Indices Slightly Lower, Italy / Spain Outperform – NMore signs of a global position unwind in the past month. U.S. stocks have underperformed (and yesterday’s bashing of the tech leaders was another sign of position cleansing), while the oft-hated Italian, Spanish, and European banking stocks (all up a touch today) have outperformed in the past month. The SX5E is only down 0.1%, in a tight range since the open.
- U.S. Dollar Higher After the Yellen News – In a surprising shift in overnight price action, the dollar initially sold off vs. most major currencies, but quickly reversed that weakness. The dollar is now higher vs. the Euro, the Pound, the Yen, and the Canadian dollar. That’s not what most traders would have expected on a night when Yellen was announced as the new nominee. Certainly a case where traders were clearly looking to sell this news.
- Commodities Mostly Lower, FOMC Minutes at 2 pm EDT – Commodities like gold, copper, and oil have also been for sale despite the Yellen news. All are lower, though not by much. The FOMC Minutes will be released at 2 pm. The next official FOMC release is on October 30th, 3 weeks from today.