Details from April's FOMC meeting support equities higher

Thursday, May 22, 2014

US markets advanced yesterday, erasing Tuesday’s declines as the release of April’s FOMC meeting minutes soothed markets. Both the S&P 500 and DJIA posted steady gains after details reassured markets that continued stimulus would not risk significant inflationary pressure. The rhetoric of holding the target rate near zero for an extended period of time was further reiterated in the meeting minutes, with market participants reassured that the central bank would announce any change in policy well in advance. With the personal consumption expenditures index, the Fed’s preferred inflation measure, holding well below the target rate of 2% there seems to be plenty of room to accommodate loose policy and ensure the labour market continues to improve. Investors will be paying close attention to today’s release of initial weekly jobless claims and continuing claims which will offer further insight. As well as the jobless claims market participants will be keeping a keen eye on US manufacturing PMI, existing home sales, the leading index and Bloomberg’s consumer comfort index.

Asian indices rallied higher carrying over the US optimism as the HSBC/Markit manufacturing PMI surprised on the upside, rising to a five month high. The reading beat expectations of a modest increase from 48.1 in April to 48.3 in May, coming in at 49.7 indicating that the tentative conditions are slowly improving despite manufacturing PMI holding below the key 50 point level which separates contraction from expansion. Base metals trading on the LME managed to push slightly higher after the announcement with aluminium and copper shoring up support after yesterday’s declines. Chinese H-shares rallied to a five week high with the Hang Seng China Enterprises Index (HSCEI) adding as much as 1.5% as it traded towards 10,162.

Both platinum and palladium prices were supported higher yesterday as the industrial action in South Africa entered its 18th week. Palladium prices rose to their highest level since September 2011 towards $830/oz while spot platinum prices held firm around $1,470/oz as strikes shutter mines owned by Lonmin, Impala Platinum Holdings and Anglo American Platinum. 

US PCE remains well below the target rate of 2%

PCE CYOY Index US Personal Cons 2014 05 22 07 30 37

HSBC/Markit Chinese manufacturing PMI rises to five month high

MPMICNMA Index HSBC China Manuf 2014 05 22 07 58 44

Platinum prices find support above $1,470/oz on strike action...

XPT Curncy Platinum Spot Oz 2014 05 22 07 57 43

...while palladium prices push towards a 32 month high

XPD Curncy Palladium Spot Oz 2014 05 22 07 50 15



Events for today

0730

DE

May

Markit Mfg & Services Flash

0900

EZ

May

Markit Mfg & Services Flash

0930

UK

Apr

PSNCR & PSNB

1330

US

Apr

Chicago Fed

1330

US

w/e

Jobless Claims

1530

US

w/e

EIA Nat Gas

1500

US

Apr

Existing Homes Sales

All times UK Local Time

 

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