Chinese data and Fed's QE tapering weighed on market sentiment

Thursday, January 30, 2014

China’s HSBC Manufacturing PMI final fell to 49.5 in January, compared to 50.5 in December, missing analysts’ expectations after showing its first contraction in six months as Chinese companies cut jobs. According to Bloomberg, Credit Suisse this week cut its growth forecast for China in Q1 2014, citing anecdotal evidence of “surprisingly slow” retail sales ahead of the Lunar New Year holiday, which starts tomorrow.

The FOMC reported yesterday that it will cut its monthly bond purchase by $10 bln to $65 billion, slowing its QE tapering policy for a second consecutive month. According to the US Fed, the recent employment data was fairly “mixed but on balance that showed further improvement”, while the US economic growth has “picked up in the recent quarters”.  Following the announcement, Dow Jones and S&P 500 retreated sharply, ending lower by 1.19% and 1.02%, respectively.

European equity markets slid slightly lower in early trading following a bearish tone from the US and Asia, overnight. It is a busy day on the macroeconomic front, with the main focus turning to the weekly US jobless claims figures as well as the GDP result for Q4 2013 and pending home sales. In the Eurozone, German CPI inflation data and unemployment figure as well as Eurozone’s consumer sentiment will draw investors’ attention. 

Commodities: Gold failed to hold overnight gains as support from China faded ahead of the Lunar New Year holiday. LME copper slipped to a near 2-month trough, as the prospect of slowing Chinese demand for base metals dampened market sentiment that had already been hit by the US Fed’s reduction of bond buying.

Brent futures held near $108 per barrel as cold conditions across the Northern Hemisphere boosted heating oil demand, while the US Fed's move weighed on crude oil prices.

XAU- Gold Daily Chart

XAU Curncy

 

LME Copper- Daily Chart 

LME COPPER 3001

Events for today: 

1330

US

Q4

Personal consumption

1330

US

Q4

GDP

1330

US

w/e

Jobless Claims

1500

US

Dec

Pending Home Sales

1530

US

w/e

EIA Nat Gas

2330

JP

Dec

CPI

 

All times UK Local Time

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