Asian Markets Trade Down

Asian markets traded down again this morning with the MSCI Asian down 0.8%. The negative market sentiment is caused by fears that the US budget deal will be the final sign the Fed needs to start tapering the $85 billion bond purchasing as early as December, spooking investors into pulling their money out of equities.

UK markets are expected to open down 25 points, despite forecasts indicating that 2014 should see the fastest growth for the UK economy in 7 years.  The companies that will be affected by the FTSE reshuffle on the 23rd of December have also been announced.  The biggest news is that the Royal Mail will be joining the blue chip index adding to the controversy that it was hugely undervalued by the Government.  The stock floated at £3.30 has gained over 80% as it approaches the £6.00 mark, giving it a market cap of over £6bn.  Ashtead group will also be joining the index with Croda and Vedanta making way for the two newcomers.

US markets will be heavily influenced by today’s unemployment claims data released at 1.30pm, forecast at 321k, regardless of the results will no doubt stir up tapering speculators into a frenzy.  Today will also see the bipartisan budget deal agreed between the Democratic and Republican negotiators taken up by the house of representatives, another step towards spurring the US recovery and providing economic stability for the next couple of years.

– Alex Conroy

Starting to see that the possibility of the Federal Reserve tapering stimulus

In a rather dramatic shift in sentiment, market participants are starting to see that the possibility of the Federal Reserve tapering stimulus at next Wednesday’s FOMC meeting is gaining in credibility. Both U.S & European indices are feeling the impact of this with the FTSE 100 on course for a sixth consecutive weekly drop for the first time since summer 2008. Whilst weakness has been seen across the board, the FTSE is being outperformed by many of its major European peers with sterling strength eating into the revenues of British exporters.

On a more positive note, the British Chamber of Commerce expect the British economy to expand at its fastest rate in 7 years in 2014, with strengthening household consumption a major contributor. However, high household debt could slow growth in 2015. The business group forecast economic growth to rise to 2.7 percent in 2014, an upgrade from the forecasts of 2.2 percent it made as recently as August. Output should pass its pre-recession peak in the second half of the year, more than six years after the financial crisis began.

Data today showed retail sales in the U.S. rose more than forecast in November as Americans bought cars and took advantage of discounts going into the holiday-shopping season. In a separate report, jobless claims surged by 68,000 to a two-month high of 368,000 in the period ended December 7th. U.S stock futures are little changed with investors weighing the data, constantly trying to gauge the timing of any cuts to Federal Reserve stimulus.

– Max Cohen

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