Market commentators, analysts and traders will immediately focus on the Fed minutes this evening to see if there’s any ‘code’ contained therein suggesting the timing and a date for a possible tapering of the $85billion per month stimulus. The crucial clues will be language suggesting that the original target of 6.5% unemployment has been abandoned in favour of a new target. Or that the target will be kept intact, but the window to reach that level, from the current level of 7.4%, will be stretched. This would allow any tapering of the asset purchasing scheme to ‘bleed’ into the equity markets without adversely threatening the current highs recently witnessed for the DJIA and SPX. The publication of the minutes and any accompanying supporting interviews, begins at 2:00 PM USA time, 7pm UK time.
The UK public sector net borrowing figures have been published this morning and as predicted by the economists polled the UK has posted a deficit of £1.6bn versus the projected £3.7bn deficit. However, it’s the swing from a positive to negative position that may be cause for alarm given that the UK has posted reasonable data results recently.
The UK posted a surplus of £832 million this time last year. Public sector net debt excluding temporary effects of financial interventions was £1,193.4 billion at the end of July 2013, equivalent to 74.5% of gross domestic product (GDP). In 2012/13, public sector net borrowing excluding temporary effects of financial interventions and also excluding the effects of the transfer of the Royal Mail Pension Plan and the transfers from the Bank of England Asset Purchase Facility Fund was £116.5 billion. This was £2.0 billion lower than in 2011/12.
Market snapshot at 10:00 AM UK time
In the Asian overnight – early morning session the main equity markets closed mostly down. The Nikkei closed up 0.21%, the Hang Seng closed down 0.69%, the CSI closed down 0.17%. In Australia the ASX 200 closed up 0.43%.
At the time of writing European markets are displaying mixed results. The UK FTSE is down 0.39%, the CAC is up 0.30%, the DAX down 0.03%, the STOXX is up 0.08%, the PSI up 0.92%, whilst the leading laggard of previous days, the Athens exchange equity index, has recovered some of its recent heavy losses to be up 0.80% in early trade, suggesting that traders are confident with regards to the visits by members of the Eurogroup and the troika over the next few weeks.
Commodities have taken a hit this morning with nearly all securities currently in the red. ICE WTI oil is down 0.49% at $104.60 per barrel. NYMEX natural is down 0.06% at $3.44 per therm. COMEX gold is up 0.82% at $1360.92 per ounce, whilst silver is down 1.14% on COMEX at $22.86 per ounce.
Looking towards equity index futures the DJIA is currently down 0.16%, the SPX down 0.22%, as is the NASDAQ equity index future also down 0.22%.
Focus on forex
Sterling advanced by 0.2 percent to 85.44 pence per euro early in the London session after rising to 85.05 on Aug 15th, the strongest level seen since July 3rd. The U.K. currency was little changed at $1.5661. Sterling has gained 5.3 percent during the past six months, by fad the best performer of the ten most developed-nation currencies tracked by the Bloomberg Correlation-Weighted Indexes. The euro has risen 4.1 percent and the dollar has strengthened 2.3 percent.
Australia’s currency slid 0.5 percent to 90.29 U.S. cents in the Sydney session from yesterday, after earlier reaching 90.18, the lowest level seen since Aug 8th. The Aussie declined 1.2 percent over the previous two days. The New Zealand dollar dropped 0.6 percent to 79.31 U.S. cents, after reaching 79.10, the lowest level witnessed since Aug 7th. It lost 1.1 percent yesterday, the most since Aug 1st.
The dollar rose 0.3 percent 97.53 yen early in the London session, the biggest advance seen since Aug 13th. The U.S. currency has risen 0.2 percent to $1.3391 per euro. The euro was little changed at 130.61 yen. The dollar has risen the most in the past week versus yen as investors await the release of minutes from the Federal Reserve’s July meeting for clues as to when policy makers may taper monetary stimulus.