Spreadex Market Analysis Update –Tuesday, October 22, 2013

AM Analysis – “Britain’s energy prices grab the headlines” – Alex Conroy
Britain’s energy prices have been a hot topic over the past month. Political parties have been attempting to use energy prices as a political weapon whilst providers such as Npower and British Gas have raised prices by up to 11%. The recent deal between EDF and a Chinese consortium to build the first nuclear power plant for a ‘generation’ provided a glimmer of hope to household’s annual spend.

Energy Secretary Ed Davey announced this would help counteract planned price raises and could reduce household energy bills by up to £77 a year. Last night however Mr Davey backtracked somewhat stating “I can’t guarantee that” thus taking away the credibility of his statement. Although this is unlikely to be the end of the energy rollercoaster the deal does provide other potential positives, such as signalling that the UK is a viable investment option for China. Further investment should follow providing a boost to the economy and further strengthening inter-country relationships.

In a theme that seems to have captured the UK with recent news announcing house prices rose 10% last month, the Bundesbank has announced that house prices in the largest cities in Germany could be overvalued by up to 20%. Concerns over this potential bubble have brought criticism on the ECB’s fiscal policy for the country, seen as too loose. With refinancing rates at 0.5%, a record low, international investors are being encouraged which is further inflating the bubble.

Non-Farm employment change results will be released today at 1.30pm, delayed 18 days due to government shutdown, investors tentatively wait for the first major economic data since the government shutdown.

PM Analysis – “Headline indices trading within a tight range” – Max Cohen
For the third session in a row, headline indices around the world were trading within a tight range as investors awaited this afternoon's delayed non-farm employment data. Early forecasts pointed to an increase in workers in September with the jobless rate expected to remain at its lowest level since 2008, an encouraging indication that the labour market was picking up before the governments partial shutdown.

However, the data has proven to be surprisingly disappointing with the actual employment change printing at 148k, falling well short of the 182k estimate. More positively, the unemployment rate has fallen slightly from 7.3% to 7.2%. Both Gold and U.S futures have risen on the back of the data with U.S futures looking to open up some 45 points. The October employment report will be pushed back to Nov 8th from the originally announced Nov 1st date, according to the Labour Department’s website.

The focus now will be on how the world’s largest recovery can bounce back from the damage caused by the fiscal impasse. Last week President Barack Obama signed legislation that funded the government through to January 15th, suspending the nation’s $16.7 trillion debt limit. With the budget dispute more than likely trimming fourth-quarter growth, Federal Reserve policymakers are expected to wait until March to begin reducing stimulus. Especially now considering the weak non-farm data.

[The original articles by Spreadex can be found here.]

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