FOMC highlights improving US outlook

Thursday, May 01, 2014

As expected the US Fed slowed bond buying by $10bn this month, voting unanimously 9-0 in favour of the cut and further boosting market confidence as FOMC officials commented on the recent pickup in growth after declines throughout winter. The base rate remained unchanged at 0.25%, in line with market expectations. Attention was drawn to an increase in household spending, with yesterday’s positive surprise in Q1 personal consumption which grew 3% q/q a nod to the positive outlook. However, weaker than expected Q1 GDP at 0.1% q/q cast the full year outlook of 20.9% into doubt, prompting the S&P 500 and DJIA to start the session on the  back foot before posting modest gains of 0.3% and 0.27% respectively. The DJIA reached a record high close at 16,580.84, but intraday moves were unable to breach the recent all-time high at 16,631.63 seen in early April.

China’s official manufacturing PMI expanded to 50.4 in April, 0.1 above the prior months reading but slightly below expectations of 50.5. Investor concerns regarding the export outlook have been mounting in recent months as efforts by Beijing to shore up the construction and property sector exacerbate cooling growth. Despite the reading undershooting expectations wider Asian equity indices posted steady gains with the Nikkei and TOPIX rallying on US optimism.

Spot silver prices closed lower for the third straight session yesterday, closing 1.3% lower as it followed the decline in gold prices on renewed economic optimism. Haven appeal has deteriorated rapidly in recent sessions and despite improving fundamentals the metal breached tentative support around $19.30/oz earlier this week with prices this morning dropping towards $19.00/oz. Any breach of the recent low at $18.95 could pave the way for protracted declines towards the 12 month low of $18.22 as investors rotate out of gold and silver and back into equity markets.

Another busy day for macro data with UK manufacturing PMI due out shortly while over in the US market participants await key weekly initial jobless claims, manufacturing PMI data, and personal income spending. Trading activity is expected to remain subdued throughout the morning as eurozone markets remain closed for Labour Day, with Chinese markets also closed for the long weekend.

DJIA closes at a record high on encouraging FOMC comments

DJI Index Dow Jones Industrial 2014 05 01 07 31 14

China's official manufacturing PMI

CPMINDX Index China Manufacturi 2014 05 01 07 34 53

Spot silver prices weaken further on economic optimism

XAG Curncy Silver Spot Oz 2014 05 01 07 49 39



Events for today

EZ, CN Market Holiday

0800

UK

Apr

Halifax House Prices

0930

UK

Apr

Manufacturing PMI

1230

US

Apr

Layoffs

1330

US

Mar

PCE & Personal Income

1330

US

w/e

Jobless Claims

1345

US

Apr

Markit PMI Mfg

1530

US

w/e

EIA Nat Gas

1500

US

Apr

ISM Manufacturing

1500

US

Mar

Construction Spending

Topics: GDP, US Fed, PMI, Silver
More from: Kash Kamal