Danske Bank - "Following the decent job report for November we now expect Fed tapering to come already in December. Below is quick check-list for the Fed on the recent development.
Speaking in favour of December tapering:
1. Housing data have rebounded.
2. Retail sales stronger.
3. Job growth has improved.
4. ISM stronger.
5. Export growth picked up.
6. Financial conditions no longer an obstacle.
7. Market now understands Fed tapering is separated from timing of rate hike. First hike now priced in November 2015 despite tapering talk.
8. Costs of QE rise the bigger the balance sheet gets.
Speaking against Fed tapering:
1. Market liquidity is thin at this time of year.
2. Durable goods orders still weak, pointing to cautious companies.
3. Hard data better but still not great. May wait for further confirmation.
4. Fiscal uncertainty still around.
5. Core Fed members (Bernanke/Yellen/Dudley) are cautious people – and they call the shots.
With the latest job data we believe the odds have tipped to December tapering. Either way it is likely to come soon as the main alternative would be January."