Spreadex Market Analysis: Investors Cautious Prior To FOMC Minutes

AM Analysis – “Asian markets failed to be galvanised” – Alex Conroy
Asian markets failed to be galvanised by forecast beating trade data with the Nikkei ending down almost 0.5%. Exports rose 18.6% on the year and imports soared 26.1%, analysts are using this as an explanation for the weakening yen with a weakened yen benefitting companies. The weakened currency is being blamed for the deficit expanding rather than the forecast narrowing, reaching Y1.09tn.

Fed tapering will be a main talking point of the day with outgoing Fed Chairman Ben Bernanke suggesting in a speech that moderation of the reserves asset purchasing is a possibility should new data in the job market suggest it is heading in the right direction. This comes before the FOMC meetings minutes will be released later today which will undoubtedly lead to volatility as investors attempt to decipher the underlying sentiment of the FOMC. Incoming chair Janet Yellen caused US bourses to sore last week when in her confirmation hearing she gave no mention of tapering. Chairman Bernanke’s speech will keep speculators guessing with regards to whether tapering will occur as soon as December or if it will in fact be as many now suspect occur in March.

PM Analysis – “European indices and U.S stock index futures are trading little changed” – Max Cohen
European indices and U.S stock index futures are trading little changed as investors remain hesitant to enter the markets before tonight’s FOMC Meetings Minutes. Market participants expect Federal Reserve policymakers to emphasise their reluctance to taper record bond purchases in the near future, with the majority of economists of the belief that the Fed will reduce the pace to $70 billion - from $85 billion – at their 18th-19th meeting.

Additionally, Fed Chairman Ben Bernanke said that the central bank will probably hold down its target interest rate at near zero for a considerable time after the asset purchases end, and possibly after unemployment falls below 6.5 percent. The main sentiment being that asset purchases are not on a pre-set course.

U.S data released today has beaten early forecasts in another encouraging sign that the U.S economy is really gathering momentum. Monthly retail sales have increased by 0.4% on last month whilst core retail sales rose 0.2%, this was against 0.1% forecasts for both. Whilst this has had a positive effect on the markets, we have not seen significant gains in either European indices or U.S futures. The focus remains squarely on tonight’s Fed Meeting Minutes.

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

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