There were plenty of high impact news events on Thursday to keep analysts on their toes. The USA unemployment claims came in worse than expectations, the USA balance of payments increased sharply, Janet Yellen gave evidence to a senate hearing during her confirmation hearing, Ireland came in for praise for how it’s handled its austerity programme, whilst Greece came under the spotlight with regards to the extra requirements it will need to implement in order to reach the targets set by the troika.
European commissioner Olli Rehn has hailed Ireland’s ‘impressive progress’ in reaching the end of its bailout programme and resisted commenting on the decision not to seek a precautionary credit line. In a statement released on Thursday Rehn said:
[quote]“I know the Irish Government has reflected very carefully on this matter. The European Commission has always made very clear that this was a decision for Ireland to take and that we would support Ireland, whichever decision was taken.[/quote]
[quote]“While challenges remain, Ireland has made impressive progress and is well placed to make a successful and durable programme exit. Graduation from the programme will send a very clear signal to markets and international lenders that the adjustment effort undertaken in Ireland, with the support of its European and international partners, has paid off. Ireland has accumulated significant cash buffers under the programme, helped by the decision taken earlier this year by European creditors to extend the maturities on loans granted to Ireland.[/quote]
[quote]”In short, today is a good day for Ireland and the Irish people. It provides clear evidence that determined implementation of a comprehensive reform agenda can decisively turn around a country’s economic fortunes and put it back on a path of sustainable growth and rising employment.”[/quote]
Yellen: QE won’t go on forever
Senator Mike Crapo took on the role of QE critic at the Janet Yellen confirmation hearing. He quickly challenged Janet Yellen on the extreme levels of the Fed’s quantitative easing, citing claims that the huge bond-buying programme has only generated a tiny amount of growth. Yellen replied that the US unemployment rate was 8.1% when QE began, and the Fed was pretty pessimistic that it would fall. It’s now 7.3%. Could QE carry on indefinitely, asks Crapo. No, Yellen replies. She does not see the programme as continuing forever. The Fed will keep looking at the US economy each month in order to see if it’s strong enough to start slowing the programme.
Euro area GDP up by 0.1%
GDP rose by 0.1% in the euro area (EA17) and by 0.2% in the EU28 during the third quarter of 2013, compared with the previous quarter, according to flash estimates published by Eurostat, the statistical office of the European Union. In the second quarter of 2013, GDP grew by 0.3% in both zones. Compared with the same quarter of the previous year, seasonally adjusted GDP fell by 0.4% in the euro area and rose by 0.1% in the EU28 in the third quarter of 2013, after -0.6% and -0.2% respectively in the previous quarter. During the third quarter of 2013, GDP in the United States grew by 0.7%.
US Unemployment Insurance Weekly Claims Report
In the week ending November 9, the advance figure for seasonally adjusted initial claims was 339,000, a decrease of 2,000 from the previous week’s revised figure of 341,000. The 4-week moving average was 344,000, a decrease of 5,750 from the previous week’s revised average of 349,750. The advance seasonally adjusted insured unemployment rate was 2.2 percent for the week ending November 2, unchanged from the prior week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending November 2 was 2,874,000, unchanged from the preceding week’s revised level.
U.S. Trade Gap Widens More Than Forecast to $41.8 Billion
The trade deficit in the U.S. widened more than forecast in September to a four-month high, reflecting a pickup in imports of consumer goods and capital equipment. Exports declined for a third month. The gap in goods and services trade increased 8 percent to $41.8 billion from a revised $38.7 billion in August, the Commerce Department reported today in Washington. The median forecast in a Bloomberg survey of 72 economists called for a $39 billion deficit.
Eurogroup demands progress from Greece
Jeroen Dijsselbloem says that the Greek government must deliver on four areas in order to reach agreement with its lenders and unlock its next aid tranche. They are: 1) achieve the prior actions, or “milestones” agreed in June (that would include cuts to its public sector workforce), 2) closing the fiscal gap in 2014 and 2015, 3) Implementing economic reforms 4) Improving the governance of its privatisation programme.
Market overview
The DJIA closed up 0.35%, SPX up 0.48%, NASDAQ up 0.18%. European indices recovered strongly from the previous day’s fall; STOXX up 1.08%, CAC up 1.04%, DAX up 1.05%, FTSE up 0.54%.
Looking towards equity indices futures the DJIA is up 0.38%, SPX up 0.52% and NASDAQ up 0.26%, CAC up 1.02%, DAX up 1.12%, FTSE up 0.57%.
NYMEX WTI oil closed up 0.06% at $93.94 per barrel, NYMEX nat gas up 1.46% at $3.62 per therm. COMEX gold closed up on the day 1.43% at $1286.50 per ounce
Forex focus
The U.S. Dollar Index, which monitors the greenback versus 10 major counterparts, was little changed at 1,018.81 at 3:19 p.m. in New York after dropping to 1,015.83, the lowest since Nov. 7th.
The yen fell 0.8 percent to 100.06 per dollar after touching 100.15, the weakest level since Sept. 11th. Japan’s currency declined 0.6 percent to 134.68 per euro. The euro slid 0.2 percent to $1.3461 after declining as much as 0.5 percent. The dollar rose from the lowest level in a week as investors believe that the Federal Reserve is still moving toward reducing its bond buying after chairman-nominee Janet Yellen said it “will not continue indefinitely.”
Australia’s dollar reversed earlier gains on speculation the central bank will cut interest rates even after a potential delay in the Fed’s plan to slow asset purchases. The Aussie fell 0.4 percent to 93.21 U.S. cents from 93.60 yesterday, when it added 0.6 percent.
The euro has gained 6.3 percent this year, the best performer of 10 developed-nation currencies tracked by Bloomberg’s Correlation-Weighted Indexes. The dollar has advanced 4 percent and the yen slumped 11 percent.
Bonds
The current 30-year yield dropped three basis points, or 0.03 percentage point, to 3.79 percent late in New York. The 3.625 percent bond due in August 2043 rose 1/2, or $5 per $1,000 face amount, to 97 2/32. The yield fell as much as six basis points. The 10-year yield fell three basis points to 2.69 percent.
At Thursday’s auction, the 30-year bond drew a yield of 3.81 percent, compared with the 3.793 percent average forecast of the Fed’s 21 primary dealers. The yield at the last offering of long bonds, on Oct. 10th, was 3.758 percent. The auction is the final of three note and bond offerings this week. The U.S. sold $30 billion of three-year debt on Nov. 12th at a yield of 0.644 percent and $24 billion of 10-year securities Wednesday at a yield of 2.75 percent.
Fundamental policy decisions and high impact news events for November 15th
The European CPI figure is published on Friday expected in at 0.7% year on year. Canada’s manufacturing sales is expected in up 0.5%. The USA empire manufacturing survey is expected to print at 5.2 up from the previous month’s 1.5. Import prices month on month are expected in down 0.4% whilst industrial production is expected in at 0.1% up for the month.
