Mid morning London session update before the New York open

Sep 18 • Mind The Gap • 1533 Views • Comments Off on Mid morning London session update before the New York open

panic-buttonWhilst the markets await the FOMC (Fed) decision this evening Greece state workers strike

“Will the FOMC meeting result in a taper, if so by how much and for how long?” are the series of questions we’ll find the answers to this evening as the second day of the FOMC meeting begins at 7:30 PM UK time. The general consensus amongst market analysts and commentators appears to be a reduction of $10 billion per month, however, there are many opinions suggesting more of a cut and several predicting only a cut of five billion dollars per month. Finally we may be in receipt of a decision which, whatever way it falls, will no doubt create market hysteria for a short period of time.

Whilst on the subject of rate setting and asset purchase/monetary easing the UK’s BoE MPC have published the minutes of their latest meeting this morning in which they’d  agreed unanimously in their recent meeting to keep interest rates at 0.5% and their quantitative easing programme at £375 billion.

Greece’s biggest public-sector union, the ADEDY, begins its two day strike today whilst holding a demonstration in Athens, as civil servants walk off their jobs in order to protest at government plans to move thousands of workers into a mobility scheme, were they’ll lose benefits if they refuse to take any job on offer. Private sector unions have also called for a four-hour work stoppage in solidarity. The strike will reveal the overall public attitude and solidarity towards the ongoing austerity measures.

Doctors in Greece began a three-day strike yesterday, however, hospitals are still receiving urgent cases. Today’s civil service walkout means that archaeological sites will be shut, courthouses closed and garbage workers refusing to collect.

Greece prepares to accept the Troika of lenders back to the country for a further bailout assessment next week. Yesterday, prime minister Antonis Samaras made a commitment to no further austerity measures if Greece needs to sign up for further aid in 2015.

The Cyprus president has suggested that the country’s capital controls could finally be lifted in January 2014 (a year after being imposed) as part of its €10bn bailout. Currently Cypriots are restricted on how much money they can withdraw from banks, or take out of the country. The Controls prevented a bank run, after losses were imposed on large uninsured depositors in order to help pay for its aid package created by the Troika.

 

Market snapshot at 10:00 am UK time

The Nikkei index rose by 1.35% in the overnight session, whilst the Hang Seng index closed down 0.27% and the CSI closed up 0.21%. The ASX 200 closed down 0.25% at 5238.

European equities are enjoying gains in the morning session; the STOXX index is up by 0.30%, whilst the FTSE is up 0.14%, the CAC is up 0.21% and the DAX up 0.24%. The  Athens exchange is up 0.40%, with the Istanbul exchange up 0.35%.

ICE WTI oil has risen by 0.77% in the London morning session to $106.23 per barrel, whilst NYMEX natural is down 0.32% at $3.73 per therm. COMEX gold is down 0.39% at $1304.30 per ounce, whilst silver is down 0.32% on COMEX at $21.72 per ounce.

Looking at equity index futures the DJIA is up 0.10%, whilst the equity index future is up 0.11% and the NASDAQ up 0.24%, all three positive indices suggesting that the USA markets will open up once the New York bell is struck.

 

Forex focus

The dollar was little changed at $1.3360 per euro early in the London session. It touched $1.3386 on Sept 16th, the weakest level seen since Aug 28th. The dollar was at 99.20 yen. The Japanese currency slid less than 0.1 percent to 132.54 per euro. Sterling was little changed at 83.93 pence per euro, having lost 0.3 percent versus the euro during the previous two days.

The dollar was near its lowest level in three weeks versus the euro before the Federal Reserve concludes its two-day meeting today. The U.S. Dollar Index, tracking the greenback versus the performance of a basket of ten major currencies, was little changed at 1,019.61 from 1,019.58 yesterday, the lowest closing level since Aug 9th.

The dollar has fallen 0.6 percent during the past week, the biggest decliner amongst the 10 developed-nation currencies tracked by Bloomberg’s Correlation-Weighted Indices. The euro has slipped 0.1 percent over the same period, whilst the yen gained 0.2 percent. New Zealand’s kiwi has jumped 1.5 percent, the best performer over the past week. New Zealand’s kiwi dollar retreated from its highest in four months. The kiwi was little changed at 82.29 U.S. cents, after it reached 82.49 yesterday, the highest level seen since May 16th.

Sterling has strengthened by circa 6.3 percent over the past six months, the best performer amongst the 10 most developed-nation currencies tracked by Bloomberg’s Correlation-Weighted Indices, however, Sterling is still down circa 28 percent from its recent peak in 2007. As Europe’s third-biggest economy the prediction is that the UK will only grow by 1.3 percent this year and by 2 percent in 2014, compared with 1.6 percent and 2.65 percent growth for the U.S., according to a Bloomberg survey of economists.

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