Daily market overview from IFC Markets
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|Oct 21, 2014, 2:03pm||#1|
Joined Oct 2014
Daily market overview from IFC Markets
We bring to your attention analytics of basic economic events.
|Oct 21, 2014, 2:08pm||#2|
Joined Oct 2014
US markets rise on good earnings reports
US markets rose for the third day as investor confidence was boosted by good corporate earnings reports. Corporate earnings are expected to increase 6.7 percent from a year earlier. Most companies report better than expected earnings, with 63.2 percent of the 87 companies in the S&P 500 that have published quarterly earnings data by Monday reporting earnings that have beat analyst expectation. Some 130 S&P 500 companies are scheduled to report corporate earnings this week. The S&P 500 gained 17.25 points, or 0.9% to 1,904.01. It is still a few points below its 200-day moving average after falling below that level last Monday. The Dow Jones Industrial Average closed 19.26 points, or 0.1%, higher at 16,399.67. It is down 1.1% since the start of the year. The Nasdaq Composite rose 57.64 points, or 1.4%, to 4,316.07, led by gains in biotech and internet stocks. The gains of major stock indexes would have been higher if IBM hadn’t posted disappointing quarterly results. IBM ’s earnings missed analysts’ expectations, and shares fell 7.1%, the biggest drop among the Dow and the S&P 500 constituents. IBM also said it will sell its global semiconductor technology business to Globalfoundries, paying $1.5 billion in cash to the company over the next three years. Apple climbed 2.1 percent to $99.76 in regular trading. The company reported a better-than-expected 12 percent jump in revenue after the markets closed, and shares rose 0.2 percent in after-hours extended trading. Today at 16:00 CET Existing Home Sales data for September for US will be released, the tentative forecast is positive. Positive data will indicate further strengthening of US economic recovery.
European markets fell on Monday after previous session’s gains. The fall came after German business software maker SAP cut its outlook for full-year operating profit and its stock plunged 5.8 percent, causing a slide in technology shares. The European STOXX 600 Technology index fell 2.4 percent. German DAX declined 1.5 percent, lagging other major European stock indexes. On this backdrop the European Central Bank has started buying covered bonds in an effort to revive the euro zone economy and ward off deflation. The euro zone annual inflation of 0.3 percent in September was far below the ECB target of close to but below 2 percent. The new purchases program starts after ECB program provided four-year loans for banks and its main interest rate was cut to almost zero. Later this year ECB plans to expand the asset purchase program by starting buying bundled loans or asset backed securities.
As statistics released in China showed the world’s second largest economy grew slower than in the second quarter, Asian shares retreated after giving up small gains on Tuesday. China's gross national product expanded 7.3 percent between July and September from a year earlier, slightly above expectations but slower than the 7.5 percent in the second quarter. The lower growth rate makes it unlikely the Chinese economic growth will meet the official annual growth target of 7.5 percent for the first time in 15 years. Analysts expect the growth rate will increase only slightly in the fourth quarter as Chinese authorities have announced they don’t plan any aggressive support measures. The Nikkei dropped 1.2 percent after surging 4 percent on Monday, its biggest rise since June 2013.
Oil fell as increased global supply exceeds the falling demand due to weakening economies. Brent for December settlement declined 76 cents to end the session at $85.40 a barrel on the London-based ICE Futures Europe exchange. The futures dropped to $82.60 on October 16, the lowest level since November 2010. Prices are down 23 percent this year. WTI for November delivery decreased 4 cents to close at $82.71 a barrel on the New York Mercantile Exchange. The more-active December contract slipped 15 cents to close at $81.91. Investors are watching whether Saudi Arabia will cut production to support prices. In its monthly report on October 14 the International Energy Agency said Saudi Arabia, the world’s biggest exporter, has “appeared determined to defend its market share” in Asia, even at the expense of lower prices. Analysts expect the price to settle at a level that will balance the budgets of major producers. Estimates vary, with London-based analyst Robert Burgess in an October 17 report estimating Saudi Arabia’s break-even price is $99.20, others predicting further falls in price.
Spot gold rose as much as 0.3 percent to $1,250.35 an ounce, the highest since September 10, and traded at $1,249.39 at 2:24 p.m. in Singapore. Gold last week posted the first consecutive weekly gain since July as the dollar dropped from a four-year high on speculation slowing global growth may prompt the Federal Reserve to delay raising borrowing costs. Policy makers Federal Reserve are expected to stop bond purchases next week, ending the quantitative easing program. Global economic recovery and stronger dollar put a downward pressure on gold as demand for safe haven asset decreases.
|Oct 22, 2014, 4:12pm||#3|
Joined Oct 2014
US markets rally on European stimulus plan, Apple report
US markets rallied on Tuesday propelled by better than expected corporate earnings report from Apple Inc and news that the European Central Bank plans to expand its monetary stimulus program. The S&P 500 jumped 37.27 points, or 2% to 1,941.28, its biggest one-day gain in a year. The benchmark index rose for the fourth straight day and moved above 200-day moving average. This may be interpreted as a sign that last week’s pullback is over. The Dow Jones Industrial Average rose 215 points, or 1.3%, to 16,614.81 and turned positive for the year. Nasdaq Composite index jumped 103.4 points, or 2.4% to 4,419.48, led by gains in biotech stocks. It registered its fourth consecutive gain and best one-day advance in more than two years. Sales of new flagship iPhone 6 helped Apple beat analysts’ estimates. Shares of Apple Inc. rose 2.7% to $102.47, after the company reported a 13% rise in profit, aided by strong demand for its new, bigger-screen iPhones. Boeing Co., Simon Property Group Inc. and Xerox Corp. are among U.S. companies reporting earnings today. As media reported the ECB is planning buying corporate bonds to provide more liquidity in an attempt to fight deflationary pressures, investors took it as a good news even though ECB officials didn’t confirm existence of plans for such expansion. Another piece of good news was National Association of Realtors report yesterday that sales of existing homes rose 2.4% in September to a seasonally adjusted annual rate of 5.17 million from 5.05 million in August. The rate increase indicates real estate market is on a recovery track after an unexpected drop in August, but the September pace is still 1.7% down from a year earlier. Today at 13:00 CET Mortgage applications for the week ended October 17 will be released in US. And at 14:30 CET the Consumer Price Index for September will be released. The tentative outlook for the consumer price index is positive.
The euro fell and European stocks rallied on a news report that the ECB may start buying corporate bonds in the secondary market to further stimulate Eurozone economy. The reports had indicated the decision could be made as soon as December and the purchases of corporate debt could start in early 2015. An ECB spokesperson later indicated that the Governing Council “has taken no such decision” about purchasing corporate bonds. The Stoxx Europe 600 index rose 2.1% to close at 323.74, recording gain for the week. Germany’s DAX 30 index added 1.9% to close at 8,886.96, while France’s CAC 40 index climbed 2.3% to 4,081.24. The U.K.’s FTSE 100 index gained 1.7% to close at 6,372.33.
Asian stocks followed the lead of US and European markets. The Nikkei Stock Average gained 1.7% after a 2% fall on Tuesday. The Hong Kong's Hang Seng Index was up 0.6% Wednesday, after the government and student leaders negotiated for the first time Tuesday. Elsewhere, Australia's S&P/ASX 200 was up 0.8% at 5366.40 and Korea's Kospi was up 0.5% at 1925.19.
Oil gained as reports on Chinese economy indicated increased industrial production in the world’s second biggest economy. Brent Crude for December settlement increased 82 cents, or 1 percent, to end the session at $86.22 a barrel on the London-based ICE Futures Europe exchange. Volume was 5.8 percent higher than the 100-day average. The European benchmark closed at a $3.73 premium to Oil WTI for December delivery, up from $3.49 yesterday. Industrial production in China rose 8 percent in September from a year earlier compared with August’s 6.9 percent, according to the National Bureau of Statistics in Beijing. Oil has been falling as major oil producers are increasing production while global demand is falling behind due to slow global economic recovery.
Gold held near the highest price in six weeks as purchases surged ahead of Diwali festival and wedding season. Dhanteras, the biggest gold-buying festival in India, was celebrated yesterday. Diwali, the Indian festival of lights celebrated on October 23, is considered a favorable time for buying gold. Researcher CPM Group estimates the holiday generates about a fifth of India’s annual purchases. Bullion for immediate delivery added as much as 0.3 percent to $1,251.90 an ounce and was at $1,249.06 by 2:47 p.m. in Singapore. Experts estimate after the additional support that Indian buyers are providing during the Dhanteras-Diwali season, gold will likely meet resistance at $1,250 to $1,260 short-term, in part due to Indian government gold tariffs imposed to assist in narrowing their current-account deficit.
|Oct 23, 2014, 12:59pm||#4|
Joined Oct 2014
US markets decline
Stock markets in US recorded modest gains in the morning trading session on Wednesdays but retraced later in the trading day. The S&P 500 snapped a four-day winning streak by falling 14.17 points, or 0.7% to 1,927.11. The Dow Jones Industrial Average lost 153.49 points, or 0.9%, to 16,461.32, dragged down by big declines in Boeing Co. The Nasdaq Composite fell 36.63 points, or 0.8% to 4,382.85. Boeing shares fell 4.5% despite beating profit expectations. Yahoo Inc. shares rose 4.5%, after the online search provider posted better-than-expected third-quarter results late Tuesday. Investor nervousness might be explained by news of shots fired at the Canadian Parliament building in Ottawa, and the sole economic news of the day of modest gain in consumer price index in September wasn’t enough to boost investor confidence. The report of US Bureau of Labor Statistics showed US consumer prices rose slightly in September owing to higher costs for food and housing, but inflationary pressures continue to be held in check by falling energy expenses. The increase was in line with expectations. Today a number of economic indicators will be released. At 9:30 CET Markit releases German Manufacturing and Services PMI advance reports for October, the tentative outlooks are positive. At 10:00 CET advance Manufacturing and Services PMIs for EU for October will be released, tentative outlook is positive. At 11:30 Retail Sales will be published in UK, the outlook is positive. At 14:30 Continuing Claims and Initial Jobless Claims for weeks ended October 11 and 18 will be published in US, the tentative forecasts are positive and negative respectively, and at 15:45 CET Markit’s Manufacturing PMI advance report for October will be published.
European markets rose on Wednesday building on the previous day’s momentum after investor confidence was boosted by news reports the European Central Bank is considering buying corporate bonds to further stimulate the Eurozone economy. The trading was uneven and the markets moved briefly into the negative zone in midmorning trading after the Spanish news agency Efe reported that at least 11 banks will fail the ECB’s stress tests. The results of the tests are due on Sunday. The euro fell after the news. Investors’ optimism spurred by news of ECB expansion of monetary stimulus program outweighed the uncertainty about the ECB banks stress tests and markets resumed the advance. France’s CAC 40 index rose 0.6% to 4,105.09. Germany’s DAX 30 index climbed 0.6% to 8,940.14. The U.K.’s FTSE 100 index added 0.4% to end at 6,399.73.
Prospects of additional stimulus programs by the European Central Bank and the steady growth of China’s economy as evidenced by the latest reports of nation’s statistics office buoyed investor optimism in Asia and propelled the stock markets. Nikkei gained 2.4% on Wednesday, recovering from a 2% drop in a previous session, after reports showed the country’s export increased 6.9% from a year earlier in September. Falling yen contributed to this surge, as well as increased shipments of components for Apple’s new smartphone. The Hang Seng Index rose 1.2% Wednesday after the government and leaders of protesters conducted official talks for the first time on Tuesday which didn’t result in an agreement how the city’s chief executive should be elected. Australia’s S&P/ASX 200 and Korea’s Kospi advanced 1.1% each.
After the US Energy Information Administration reported yesterday that crude stockpiles expanded 7.1 million barrels last week, more than expected, West Texas Intermediate for December delivery in electronic trading on the New York Mercantile Exchange dropped $1.97 to $80.52 yesterday, the lowest close for a front-month contract since June 28, 2012. It was at $80.62 a barrel in electronic trading on the New York Mercantile Exchange, up 10 cents, at 2:55 p.m. Singapore time. The volume of all futures traded was about 26 percent above the 100-day average. Prices have decreased 18 percent this year. Brent was steady in London. As oil is getting a downward push due to the expanding production and trailing demand, Libya’s OPEC governor called for output cut. Venezuela earlier had requested a special meeting to discuss measures to boost the price. Saudi Arabia and Kuwait have signaled that the fall in oil prices doesn’t warrant immediate production cuts. OPEC, responsible for about 40 percent of the world’s crude supply, is scheduled to meet on Nov. 27 in Vienna.
Expectations of drier weather in US and rain in Brazil have reversed the recent soybeans upward trend. The improved weather will allow US farmers to accelerate harvesting of a record crop, and rain in Brazil boosts the outlook for production. The contract for November delivery dropped as much as 0.7 percent to $9.56 a bushel on the Chicago Board of Trade and were at $9.6125 by 2:30 p.m. in Singapore. Corn for December delivery fell as much as 0.4 percent to $3.515 a bushel and was at $3.525. Wheat for delivery in December lost 0.3 percent to $5.2075 a bushel.
|Oct 27, 2014, 3:31pm||#5|
Joined Oct 2014
S&P 500 hit two-year high
World markets went on rising on Friday. S&P 500 climbed 5.5% during the week, the 2-year high. The macroeconomic data was neutral on Friday. Microsoft good earnings report boosted the stock prices. Its stocks rose 2.5% and Procter & Gamble (+2,3%). Amazon stocks tumbled 8.3%, but it could not drag down the US stock market. However, the activity of market participants was considerably low. The trading volume on US exchanges was 5.3 billion stocks, 35% lower than the October average.
Currently, 205 companies listed in S&P 500 announced their earnings reports. The 69.8% of companies’ earnings outperformed the tentative forecasts. On average such a surplus was observed in only 63% of the companies since 1994. Profit forecasts overshot 59.8%. This is less than the average level since 2002, which is equal to 61% of the companies. Today Pending Home Sales in September are to be released at 14-00 СЕТ in the United States. The outlook is positive. It should be noted that S&P 500 upped 4.7% on the quarter-average since March 2009 to June 2014. This is almost five times higher than the quarterly average increase in GDP (+0.9%) for the same period. The gap in the growth rate of the American GDP and the US stock market is now the largest since 1947. S&P 500 has been rising for 68 consecutive months for the first time since 1938. In our opinion, all that may indicate that US exchanges may slump down again.
European stocks ticked up on Thursday and Friday together with the American ones. Today they are down due to weak performance of the German economy in October, or the so-called Ifo indices. The results of the ECB stress tests also boosted the prices. These tests were failed by 25 European banks. At 14-30 СЕТ we expect the ECB to announce the conditions of covered bonds purchase. There is a possibility that this data may weaken the euro.
Today Nikkei dipped together with other world indices. The Japanese economy recovery is fragile and needs the monetary incentive, as the Prime Minister of Japan Shinzo Abe announced. According to his point of view, another sales tax hike is needed in order to reduce the budget gap. It may occur in April 2017. Tonight Retail Sales in September is to be released at 23-50 СЕТ in Japan. We assume the outlook to be negative.
According to the US Commodity Futures Trading Commission (CFTC), hedge funds increased the number of oil net long positions by 5.7%. It happened regardless of Goldman Sachs report: the average Brent crude price forecast was lowered for the first quarter of next year from $100 per barrel to $85, and WTI – from $90 to $75 per barrel. Thus, in Q2 of 2015 a barrel for both types of oil may go down even $5 more. According to Goldman Sachs, the US demand for imported oil would be reduced as its own shale oil production increases. The states not included in OPEC, and especially Russia will not cut the production output since the country is in need of oil revenues amid the Western economic sanctions. In turn, we accept the possibility of a "technical" upward retracement of the world oil prices. It can be fostered by the recent news from India and Indonesia about a significant increase in demand for petroleum products in 2015. Thus, the diesel fuel consumption in India could increase 2.8% compared to the growth of 1.3% this year. Note that the current drop in oil prices was affected by the fact that OPEC production hit the three-year high, so in September it was 30.47 million barrels per day. At the same time, the US oil production reached the highest level of 9.5 million barrels per day since 1970. Meanwhile, it is hard to say whether the oil production will be increased, so that it would meet the rising demand of South-East Asia amid falling oil prices by 25%.
Dilma Rousseff's victory at the presidential elections in Brazil pushed the world coffee and sugar prices down. Market participants believe that the Real weakening (Brazilian currency), which Dilma Rousseff stands for, can boost the growth of Brazilian exports. Let us remind you that since she has been at the office since 2011, Real to US dollar rate has fallen by about one third. We assume that in the midterm coffee and sugar price fluctuations would mostly depend on weather conditions and crop forecasts, and not on political factors.
|Oct 28, 2014, 1:25pm||#6|
Joined Oct 2014
US markets mixed after last week's rally
After an uneven trading US stock indexes finished Monday session little changed. Investors have adopted a wait and see approach ahead of the Federal Open Market Committee meeting and further corporate earnings reports. The S&P 500 index lost 2.95 points, or 0.2%, to 1961.63. The Dow Jones Industrial Average added 12.53 points, or 0.1%, to 16817.94. The Nasdaq Composite Index gained 2.22, or less than 0.1%, to 4485.93. Investors preferred the safety of defensive stocks over cyclical businesses that tend to be more responsive to changes in the state of overall economy. The gains in defensive stocks - shares of big companies in consumer staples, utilities and telecom that tend to pay dividends and are more stable in business cycles, were offset by big losses in cyclical shares- energy and materials companies that are more dependent on economy. Energy shares were the most actively traded, and their decline pulled the S&P 500 index down. The S&P 500 Energy sector index declined 2% and has dropped 15.4% in the last three months due to sliding oil prices. Shares of Exxon Mobil fell 0.8%. Investors are waiting to see what the Federal Open Market Committee will decide as the US central bank holds a policy meeting today and Wednesday. The Fed is expected to announce the completion of its quantitative easing program. It is widely anticipated that the Federal Reserve will likely reinforce its stated willingness to wait a long time before hiking interest rates after a volatile month in financial markets. Data on Monday showed U.S. services sector activity slowed in October to a six-month low, while manufacturing output in Texas decreased. Based on the recent data of weak US inflation, troubled state of European economy and strengthening dollar, it is more likely that the Fed will not indicate plans for early interest rate hikes as the current global growth slowdown and disinflationary pressures negatively affect the US recovery. It should be noted that the Federal Reserve expected the US recovery would continue to strengthen which would allow them to raise interest rates around middle of the next year. Today at 13:30 CET Durable Goods Orders for September will be released in US, the forecast is positive. At 15:00 CET the Conference Board Consumer Confidence Index will be published. The tentative outlook is positive.
European stocks fell on Monday as investors decided to take profit after recent gains and the European Central Bank review of the region's banks. Though the results of the tests were considered positive by traders and fund managers, most euro zone banking stocks declined, pairing big gains made in the run-up to the results of the ECB review. STOXX euro zone bank index fell 2.3 percent, after surging 14 percent since mid-October. Hurting sentiment, the Munich-based Ifo's business climate index, based on a monthly survey of some 7,000 firms, fell to 103.2 from 104.7 the previous month, suggesting deteriorating outlook for Europe's largest economy in the fourth quarter. UK's FTSE 100 index fell 0.4 percent, Germany's DAX index shed 1 percent and France's CAC 40 lost 0.8 percent. Asian shares were modestly higher while the dollar held steady on Tuesday, as investors awaited the outcome of the U.S. Federal Reserve's two-day meeting that begins later in the session for clues to the direction of U.S. interest rates. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose about 0.3 percent. But Japan's Nikkei stock average declined further, shedding 0.8 percent on concerns over corporate earnings after disappointing results from Canon Inc, despite upbeat economic data released before the market open.
In commodities markets, West Texas Intermediate crude oil fell for a third day amid speculation crude inventories increased to near a four-month high in the US, the world’s biggest oil consumer. Brent crude oil fell in London. Brent for December settlement decreased as much as 68 cents, or 0.8 percent, to $85.15 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude oil traded at a $4.81 premium to WTI.
Wheat rose for a second day on concern that harvests in Australia and Russia may drop because of extreme weather. Soybeans fell from a seven-week high. Wheat for December gained as much as 0.6 percent to $5.2575 a bushel on the Chicago Board of Trade and was at $5.25 at 10:43 a.m. in Singapore.
|Oct 29, 2014, 2:32pm||#7|
Joined Oct 2014
Markets rally ahead of FOMC meeting
US markets rose sharply on Tuesday ahead of the Federal Reserve’s two day policy meeting statement on Wednesday. The S&P 500 added 23.42 points, or 1.2%, to 1,985.05. Broad-based gains were led by the energy and industrials sectors, which recovered some of the steep losses from Monday. The Nasdaq Composite rose 78.36 points, or 1.8%, to 4,564.29. The Dow Jones Industrial Average jumped 187.8 points, or 1.1%, to 17,005.75, closing above the 17,000 level for the first time since October 3. Investors are clearly expecting that the Fed will not adopt a hawkish stance on tightening the monetary policy and will likely reinforce its stated willingness to wait longer before raising interest rates. In its previous statement the Fed had indicated the rates will remain low for a “considerable time”, and the market consensus was the rates would not be hiked before mid 2015. The Fed forecasts have estimated the US economy will grow around 3 percent this year with inflation rising gradually to Fed’s target level of 2 percent. But slower than expected global growth presents a challenge for US economic recovery, as indicated by recent economic data. As Commerce Department reported yesterday, the demand for US made capital goods excluding aircraft fell 1.7 % in September against an expected increase of 0.6%, second month in row. It is the biggest drop in eight months. A second report indicated US home prices grew by less than forecast in August, according to S&P/Case-Shiller’s 20-city composite index. A third report by Conference Board said the index of consumer attitudes increased to 94.5 in October, the highest reading in seven years. Investors clearly discounted poor economic reports by focusing on improved consumer optimism and confidence in the short-term outlook for the economy. The weak capital goods orders and house price data indicate a slowdown in activity, further indication of unsteady US recovery. As a result of slower than expected global growth and slower US recovery investors have recently pushed their expectation for an initial interest rate hike back to next year, although some top Fed officials recently said they think the US Central Bank is still on track to bump up borrowing costs in mid 2015. Investors will be reading closely the statement the Fed will issue at 19:00 CET to see whether it continues to refer to “significant” slack in the US labor market and whether it retains language indicating rates will remain low for a “considerable time” as widely expected.
uropean stocks rebounded on Tuesday after yesterday’s losses as better-than-expected results from a number of blue-chips including pharmaceutical group Novartis and bank UBS helped lift sentiment. The German DAX rose 1.9 percent. The gains of French CAC and Britain's FTSE indexes were more modest at 0.4 percent and 0.6 percent respectively as a result of steep falls in French pharmaceutical Sanofi and UK-listed Standard Chartered Bank after they reported results that missed expectations. Stronger corporate reports have propped investor optimism after the market hit a low for 2014 just under two weeks ago. Asian shares advanced to one-month highs on Wednesday, helped by US market rally. Japanese stocks rose after better-than-expected industrial production data and upbeat earnings figures bouyed investor sentiment. Industrial production rose by 2.7 percent in September, the trade Ministry reported, the fastest pace since January. The Nikkei share average jumped 1.4 percent. MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.7 percent, led by a 1.2 percent rise in South Korean shares.
West Texas Intermediate crude rose as supply and recent economic data gave rise to speculation that fuel demand will increase in the US, the world’s biggest oil consumer. US crude stockpiles dropped by 3.7 million barrels, the American Petroleum Institute reported yesterday. And the data from the Conference Board showed consumer confidence in US advanced to a seven-year high in October, providing indication of better US economic outlook. WTI for December delivery rose as much as 41 cents to $81.83 a barrel in electronic trading on the New York Mercantile Exchange and was at $81.71 at 1:07 pm Seoul time. Brent Oil for December settlement gained as much as 35 cents, or 0.4 percent, to $86.38 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $4.60 to WTI, compared with $4.61 yesterday.
Gold traded above a two-week low as investors assessed the health of the US economy before the Federal Reserve concludes a policy meeting. Gold for immediate delivery dropped to $1,222.62 an ounce yesterday, the lowest price since October 15, before rebounding as US data showed durable goods orders unexpectedly declined. It traded at $1,230.01 an ounce by 12:16 pm in Singapore from $1,228.52 yesterday. Russia joined Turkey in adding bullion to reserves according to the International Monetary Fund data. Silver for immediate delivery traded at $17.235 an ounce from $17.214. Spot platinum rose 0.2 percent to $1,269.75 an ounce from $1,266.75. Palladium was little changed at $793.93 an ounce after a four-day increase.
|Oct 30, 2014, 12:01pm||#8|
Joined Oct 2014
US markets close lower after Fed decision
The US markets slipped on Wednesday after the Fed statement confirmed the expected completion of the bond buying stimulus program and added language that ties the timing and pace of any future rate hike to incoming economic data. The S&P 500 closed 2.75 points, or 0.1%, lower at 1,982.30. The Nasdaq Composite Index, which was already under pressure from Internet stocks lost 15 points, or 0.3%, to 4,549.23. Meanwhile, the Dow industrials dipped 31.44 points, or 0.2%, at 16,974. While the end of Quantitative Easing was widely anticipated, investors were surprised with the Fed’s upbeat view on the labor market. The Fed’s view implies the U.S. economy is on firm footing but the markets had hoped for more signs that a low-rate policy would be maintained for an extended period. The Fed characterized the labor market conditions by stating that the range of labor market indicators suggests the underutilization of labor resources is gradually diminishing. This is an important departure from previous statement in which it had described the US labor market slack as “significant”. Conditioning the future rate hikes on US economy performance the Fed nevertheless reconfirmed that interest rates would remain low for a "considerable time" following the end of the bond purchases this month. Together with an assessment of improved labor market conditions the statement explicitly stated for the first time the Fed could raise interest rates sooner than markets have forecast, if the economy grows faster than the bank projects. Fed officials didn’t refer to recent financial turmoil or global economy weakness and the risks they pose to US economic growth, instead they repeated language from September that the likelihood of inflation running persistently below 2 percent has diminished somewhat. The statement expressed confidence the US economic recovery would remain on track despite signs of a slowdown in many parts of the global economy. The investors were clearly expecting a more dovish assessment, and were particularly surprised by the Fed’s statement of possible sooner rate hikes than currently anticipated “if incoming information indicates faster progress toward the committee's employment and inflation objective than the committee now expects”. Fed's Head Janet Yellen speaks in Washington today at 14:00 CET. And new economic data are coming out today in US: at 13:30 CET the third quarter US Gross Domestic Product estimates, the Core Personal Consumption Expenditure (QoQ) for the third quarter, Continuing Claims for the week ended October 18 and Initial Jobless Claims for the week ended October 25 will be released.
European stocks advanced on Wednesday ahead of the statement from the US Federal Open Market Committee. France’s CAC 40 index rose 0.2% to 4,120.37. Germany’s DAX 30 index gained 0.5% to 9,111.09. The U.K.’s FTSE 100 index picked up 0.8% to 6,455.85. The Stoxx Europe 600 index added 0.3% to 329.36, on track for its highest closing level in three weeks. No major economic data were expected to be released during the day and markets anticipated the FOMC statement to announce the end of the quantitative easing program and issue a dovish guidance on interest rates. Stocks in Asia rose Wednesday ahead of a U.S. Federal Reserve announcement on quantitative easing and after a rally on Wall Street on Tuesday. The Nikkei gained 1.5% to 15,553.91, helped by a stronger dollar and earnings from heavyweights such as Nomura Holdings and Hitachi Construction Machinery. On Thursday morning stocks in Japan rose as the Federal Reserve’s statement that the U.S. labor market was improving and interest rates would remain low for a "considerable time" boosted investor optimism about US economy. The Nikkei benchmark rose 0.7 percent to 15,665.24 points by mid-morning, the highest since October 9.
West Texas Intermediate Crude Oil fell from a one-week high after data from Energy Information Administration, the Energy Department’s statistical arm, showed crude stockpiles rose as output surged to a record high in the US, the world’s biggest oil consumer. WTI for December delivery dropped as much as 45 cents to $81.75 a barrel in electronic trading on the New York Mercantile Exchange, and was at $81.84 at 4:40 p.m. Seoul time. Brent Oil for December settlement declined as much as 32 cents, or 0.4 percent, to $86.80 a barrel on the London-based ICE Futures Europe exchange. The contract rose 1.3 percent yesterday.
Gold tumbled as markets priced in the reduced expectation of inflation after the Federal Reserve ended its bond purchasing program. Gold for immediate delivery dropped 1.4 percent to $1,211.68 an ounce at 3:49 pm New York time, heading for the biggest drop since October 3. Prices touched $1,208.50, the lowest since October 8. Goldman Sachs Group Inc. predicts gold prices will drop to $1,050 over the next 12 months as the US economy accelerates. Silver futures for delivery in December added 0.2 percent to $17.264 an ounce on the Comex. On the New York Mercantile Exchange, palladium futures for delivery in December advanced 0.9 percent to $800.70 an ounce. Prices rose for a ninth straight sessions, the longest rally since August 18. Platinum futures for January delivery gained 0.2 percent to $1,269.20 an ounce.
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