The Well-Tempered Clavier

December 16-21, 2013

In North America...

Markets:  Following the Fed's announcement to begin tapering, markets shot up. The S&P 500 closed up 2.5 per cent for the week and the TSX gained 2.1% for the week (and 7.8% so far for the year). While the taper had been expected, many did not anticipate its announcement until 2014, causing sharp market movements. It was the last full week of trading for 2013. 

What was actually committed to? US Government asset purchases (U.S. Treasuries and mortgage-backed securities) will drop from US $85bn per month to US $75bn from January. Additionally, interest rates will stay low well past unemployment falling below 6.5% (it is now at 7%). Essentially, forward guidance was strengthened, giving increased confidence and transparency to investors. 

Companies: Last week BlackBerry posted a quarterly loss of US $4.4 bn ($8.37 per share), down from a profit of $9 million or two cents a share a year ago. Interestingly enough, the stock rallied. This was likely fuelled by a five-year manufacturing partnership with Foxconn, optimistic comments from new chairman and interim CEO John Chen and short covering, as traders who bet against the stock — or shorted the security — had to buy back the borrowed shares. The stock is still down from a 52-week high of $18.49.

Unsurprisingly, sociability continues to trouble bankers. JPMorgan banned its staff from using chat services, which are at the heart of market manipulation investigationsBloomberg said banks could monitor staff’s use of its popular chat function, and even block suspect words.

Otherwise: Two weeks after China's central bank banned bitcoins (BTC) from Chinese financial institutions the coins are yet again in the news. The coin's value plunged after China's largest Bitcoin exchange was forced to stop accepting deposits and cease renminbi-account charging functions. Still confused what bit coins are? Read this explainer (and mine the coins while doing so). 

In Europe...

The US Fed's move impacted European markets, as well. The FTSE Eurofirst 300 gained 3.6 per cent for the week, its best weekly performance in eight months.

The UK also had good growth numbers on Friday, which confirmed that the economy grew 0.8 per cent in the third quarter. GDP is now 2 per cent below its pre-crisis peak, rather than the 2.5 per cent previously thought. Furthermore, the German and French are spending more, according to research published by GfK.  Particularly in Germany, where Germans’ willingness to spend rose to 46.1 – its highest level since December 2006 – on the back of expectations the region’s recovery will gain ground in the months ahead.

In the coming week...

Is Christmas. Ideally, nothing will happen.