Markets drift lower on tapering speculation

Friday, December 13, 2013

US stocks fell for a third consecutive session as both the S&P 500 and DJIA slipped to a one month low after economic data released yesterday heightened investor concerns of a potential Fed taper announcement as early as next week. The S&P 500 closed 0.38% lower while the DJIA shaved 0.66% off its value as retail sales accelerated 0.7% in November which was slightly better than the 0.6% expected by analysts polled in a Bloomberg survey. However, equity bulls may be placated with continued stimulus as initial jobless claims for the week ending 7th December were well above the median Bloomberg survey estimate of 320K after claims rose 70,000 from the previous week, coming in at 368K. The sharp increase in jobless claims highlights the fragile labour market conditions and could prompt the Fed to hold off from any curtailment of its bond buying programme at the upcoming December FOMC meeting, scheduled next week.

Gold prices extended declines yesterday, losing 2.25% as expectations that physical buyers would be attracted to the lower levels failed to materialise into a significant rally. Spot prices started the week on a strong footing, rallying towards $1,260 as physical buyers from Asia took advantage of the weaker dollar and lower price. However, recent weeks have seen prices struggle to move above the $1,250-80 area, and with the dollar index rebounding and speculation that the US Fed could begin tapering in the coming week spot prices have since slipped back towards $1,225/oz.

Asian markets experienced a mixed session with Japanese equity indices struggling for direction as market participants weighed the prospect of a reduction in QE at next week’s FOMC meeting. The Nikkei gained 0.4% while the TOPIX pared 0.27% in a jittery session. The yen reached 103.92 against the dollar, a level last seen in 2008 as continued easing by the BoJ has seen the currency weaken 20% against the dollar since the start of the year.

 

Surprise increase in initial jobless claims, climbing towards October peak

INJCJC Index US Initial Jobless 2013 12 13 07 51 27

Spot gold prices drift lower as dollar strength pins down moves higher

DXY Curncy DOLLAR INDEX SPOT 2013 12 13 08 00 53

Yen weakens towards 104 against the dollar, a level last seen in 2008

JPY Curncy Japanese Yen Spot 2013 12 13 08 12 59



Events for today: Friday, 13 December 2013

1000

EZ

Q3

Employment

1330

US

Nov

PPI core

OE: 

Dec  Crude WTI (NYMEX)

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Topics: Gold, JPY, DXY
More from: Kash Kamal