Perhaps the most illuminating comment in the latest FOMC meeting minutes, published late Wednesday evening, was the commitment that; “the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends”. This appears to suggest that even if (when) the current monetary easing programme, loosely attached to a vague unemployment target of 6.5% ends, then the Fed will indulge in further rounds of QE in order to keep all the plates spinning. The release of this publication caused many spikes across a range of securities. EUR/USD sold off sharply, as did cable.
Bank of England Agents’ summary of business conditions
Growth in the value of retail sales and consumer services had been unchanged, in the past three months on a year earlier. However, retail sales growth had appeared to soften in recent weeks. Demand for house purchase had continued to strengthen, outpacing the increase in supply. Investment intentions had remained modestly positive. Manufacturing output growth had edged higher. Growth in business services turnover had risen slightly, with a broadening of growth across sub-sectors. Annual growth in construction output had continued to recover, driven by new house building.
ZEW Switzerland – Optimism Continues Among Swiss Financial Experts
In November 2013 economic expectations for Switzerland have increased by 6.7 points. Accordingly, the ZEW-CS-Indicator of economic expectations has reached the 31.6 points-mark, continuing its upwards trend observable in the past half year. The ZEW-CS Indicator reflects the expectations of the surveyed financial market experts regarding the economic development in Switzerland on a six-month time horizon. It is calculated monthly by the Centre for European Economic Research (ZEW) in cooperation with Credit Suisse (CS).
Retail Sales in U.S. Increased More Than Forecast in October
Retail sales in the U.S. rose more than forecast in October, a sign that consumer spending was resilient even during the government shutdown. The 0.4 percent increase was the most in three months and followed no change in September, Commerce Department figures showed today in Washington. The median forecast of economists surveyed called for a 0.1 percent October advance. Sales excluding gasoline climbed 0.5 percent. Fuel costs near their lowest levels in more than two years and household wealth boosted by rising stock and home prices may keep underpinning consumers’ ability to buy.
October Existing-Home Sales Cool but Low Inventory Drives Prices
Existing-home sales declined for the second consecutive month in October, while constrained inventory means home prices continue to see double-digit year-over-year gains, according to the National Association of Realtors. Total existing-home sales, which are completed transactions that include single-family homes, town-homes, condominiums and co-ops, fell 3.2 percent to a seasonally adjusted annual rate of 5.12 million in October from 5.29 million in September, but are 6.0 percent higher than the 4.83 million-unit level in October 2012. Sales have remained above year-ago levels for the past 28 months.
Minutes of the Federal Open Market Committee
The Manager of the System Open Market Account reported on developments in domestic and foreign financial markets as well as System open market operations, including the progress of the overnight reverse repurchase agreement operational exercise, during the period since the Federal Open Market Committee (FOMC) met on September 17-18, 2013. By unanimous vote, the Committee ratified the Desk’s domestic transactions over the inter meeting period. There were no intervention operations in foreign currencies for the System’s account over the inter meeting period.
Market overview
The DJIA has now experienced three negative trading days since the bullish momentum took it briefly past 16000 to close down at 15,900 down 0.41% on the day. SPX down 0.36% and the NASDAQ down 0.26%. European indices experienced mixed fortunes on Wednesday; STOXX down 0.06%, CAC down 0.09%, DAX up 0.10% and UK FTSE down 0.25%.
Equity index futures at the time of writing are posting negative; the DJIA down 0.32%, SPX down 0.27% NASDAQ down 0.23%. Looking towards Europe’s open in the morning the STOXX is down 0.10%, DAX up 0.03%, CAC down 0.52% and the UK FTSE equity index future is down 0.45%.
NYMEX WTI oil was flat on the day at $93.33 per barrel. NYMEX nat gas up 0.77% at $3.68 per therm. COMEX gold fell sharply on the day, down 2.31% at $1244.20 over ounce. Silver was down 2.38% falling critically below the $20 level to close the day at $19.84 per ounce.
Forex focus
The U.S. Dollar Index, which monitors the greenback against 10 major peers, increased for the first time in four days, adding 0.4 percent to 1,019.10 yen late in New York. The euro declined 0.9 percent to 134.34 yen after earlier touching 135.95, the strongest level since October 2009. The shared currency fell 0.8 percent to $1.3435. The dollar slid 0.1 percent to 99.99 yen. The dollar rose versus most major peers as Federal Reserve officials said they might reduce their $85 billion in monthly bond purchases “in coming months” as the economy improves, minutes of their last meeting show.
The pound advanced 0.2 percent to $1.6150 late in London time after increasing to $1.6178, the highest level since Oct. 28th. The U.K. currency jumped 0.8 percent to 83.29 pence per euro, the biggest gain since Oct. 31st. The pound strengthened to a three-week high against the dollar as speculation the Bank of England will raise its benchmark interest rate earlier than it forecast spurred demand for the U.K. currency. The loonie, as Canada’s currency is known gained 0.2 percent to C$1.0450 per U.S. dollar at 3:26 p.m. in Toronto. It strengthened as much as 0.3 percent, the most since Nov. 13th. The currency has traded this month between C$1.0526 and C$1.0398. One Canadian dollar buys 95.69 U.S. cents.
Bonds
The benchmark 10-year yield gained nine basis points, or 0.09 percentage point, to 2.80 percent early New York time. The 2.75 percent note due in November 2023 dropped 25/32, or $7.81 per $1,000 face amount, to 99 19/32. The yield reached the highest level since Sept. 18th.
Fundamental policy decisions and high impact news events for November 21st
Thursday sees the publication of Germany’s and France’s flash manufacturing and service PMIs together with Europe’s which is expected to print at 51.6 for manufacturing and 51.9 for services. The RBA governor of Australia holds court on Thursday, whilst the UK’s public net sector borrowing is published expected slightly up in at £10.1 bn. USA PPI is expected in at -0.1% whilst unemployment numbers are expected in at 333K, slightly up from the previous week. Flash manufacturing data is expected to print at 52.6. Europe’s consumer confidence is expected in at -14.1 with the Philly manufacturing index for the USA expected in at 15.1, down from 19.8 the previous month
