Thursday's Markets In Review

European markets opened lower today despite the FOMC yesterday announcing it would maintain its $85 billion monthly bond purchasing scheme, a move widely expected by investors. However, the reason the markets are cautious today is because officials threw a spanner in the works when they hinted that tapering could occur earlier than many investors thought. Policy officials argued that advancements in household spending as well as investments were encouraging despite a struggling housing market.

Thus, the news yesterday from the FOMC is a bit of a mixed bag. Although officials failed to provide a specific timeframe as to when tapering would occur, which left investors in the dark, they did once again reiterate the importance of economic fundamentals before a decision to taper or not is approved.

Clearly investors now need to change their view of the FOMC from being predictable, to perhaps being a more dynamic and possibly even ambiguous organisation, which will make reading between the lines especially difficult for investors.

PM Analysis – “A down day for bourses” – Alex Conroy
A down day for bourses today in general with a slew of unfavourable results; adding to speculator’s unease following last night’s FOMC announcements.

Inflation in the euro zone missed its forecast significantly coming in at 0.7% as opposed to the target of around 2%. European unemployment figures also came in worse than expected at 12.2% as opposed to the forecast 12%. The recent confidence in the euro zone emerging from recession over the past few months and seeing new growth will be dampened somewhat by these results. Investors could be scared to get back in the water all over again.

Last night’s announcement of no tapering, although expected, has caused a slight hangover today. Initially thought to happen next March,it is now assumed to happen as early as December leading speculators to overreact and push the markets down. Neither U.S jobless claims falling more than expected nor favourable Chicago PMI results today have done anything to halt the slide in the US markets.

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