Markets Adjusting To Data And The Fed Announcement

Now that the Federal Reserve has decided not to taper this month and could wait till early 2014 before thinking of pairing back its massive $85 billion a month asset purchase plan, markets are digesting the news. We are also seeing markets react to tepid manufacturing and other mixed U.S. economic data.

This week, could be interesting as we have the European Central Bank, Bank of England and Royal Bank of Australia all meeting. We are expecting them to stand pat on monetary policy as well. The week will close with the much anticipated, but delayed, U.S. non-farm payroll (NFP) report.

STOCKS

U.S. markets finished higher on Friday as well as higher for the week. Except the Nasdaq Composite which posted a weekly loss.

The DJIA was up nearly 70 points to close at 15,615.55 and 0.5 percent higher for the week. The S&P 500 was up 5 points to close at 1,761.64. The market was up 0.1 percent for the week and is the fourth straight week of gains. The Nasdaq Composite was lower most of Friday, before recovering to add 2.34 points before the session close. The tech heavy index was down 0.5 percent on the week.

Turning our attention to Asia, as the time of this report, China’s benchmark was down a nominal 0.5 percent and is now trading below the key 2,150 level. This comes despite good economic data in China’s services sector which showed it expanded at its fasted pace in nearly thirteen months.

The Nikkei in Japan is shut for a public holiday but lost over 126 points to close at 14,201.57 on Friday.

The Kospi, in South Korea is now down 0.5 percent and at its lowest level since 2,025 hit back on October 25. In Sydney, the ASX 200 was down 0.4 percent, as corporate earnings dragged the index lower and off its recent highs.

CURRENICIES

AUD/USD (0.9479) was up today on the back of stronger than expected retail sales. We are currently testing 0.95. A break there takes us to 0.980 and then parity is above that level.

EUR/USD (1.3479) continues its fall today. At one point we were below the support at 1.3473. The Euro will be erratic up until the ECB decision this week. We are still moving lower and look to be testing 1.3400. GBP/USD (1.5926) remains soft despite good weekend news. The Confederation of British Industry has raised its growth forecast of the United Kingdom. They are expecting 1.4 percent GDP growth in 2013 and in 2014 2.4 percent. Still, the Sterling is testing support near 1.58850.

COMMODITIES

Gold (1312.90) lost one percent on Friday as mixed U.S. data helped boost the Dollar. For the week the yellow metal lost 2.9 percent. We are testing support at 1310 at this level now. A break below that sees 1300 then a break lower opens the doors for 1250. If 1310 holds then we could see a brief recovery towards 1325.

WTI Crude (94.57) has fallen on the back of increasing inventories in the U.S. this week. We are testing support at 94.50 a break below that can see 90.00.

TODAY’S OUTLOOK

This week, and today for sure, markets will range bound till the ECB and Bank of England meet later this week. The Royal Bank of Australia I also set to meet this week.

As for data today, the U.S. will release ISM data, factory orders and durable goods.