Markets snap rally as momentum wanes

Wednesday, November 20, 2013

Asian stocks ex-Japan managed to recover the majority of the previous sessions losses as a combination of loose monetary policy in the US and hopes of continued reform in China lifted markets. The Shanghai Composite added 0.62% in a choppy session which saw the index swinging between gains and losses throughout the day while the CSI 300 rallied 0.53% higher. Investors reacted positively to the PBOC’s decision to set the yuan’s midpoint for trading on Wednesday at 6.1305 per USD, the highest level since revaluation in 2005 and a sign that the central bank was positioning the currency to be more market focused. Japanese equity indices struggled to build on recent momentum as gains for exporters owing to a weak yen were counteracted by a pullback in financials. Both the Nikkei and TOPIX spent most of the day under pressure, closing down 0.33% and 0.28% respectively.

Fed chairman Bernanke indicated in his speech yesterday that the labour market has shown “meaningful improvement” since the central bank initiated its QE programme and went further to state that benchmark interest rates would most likely remain at low levels after bond buying is curtailed. Both the S&P 500 and DJIA struggled to break higher as investors chose to sit on the side-lines ahead of FOMC meeting minutes for October, due later this evening. The VIX index rose 2.21% throughout the session as investors, while optimistic given the recent string of positive data, remain cautious to any negative surprises.

3-month LME copper prices staged a recovery yesterday, encouraged by Bernanke’s comments regarding low benchmark interest rates. Prices closed 0.45% higher after briefly touching $7,000 throughout the day. The comments by Bernanke echo those of vice-chairman Janet Yellen who signalled last week that the economy would need to provide further indication of a sustained improvement before a cut in bond buying would be instigated. 3-month aluminium prices also managed to lift higher, snapping a 7-day bear run and gaining 0.56% after declining 2.15% since the start of last week. 

Events for today: Wednesday, 20 November 2013

0930

UK

Nov

BOE minutes

1330

US

Oct

Retail Sales

1500

US

Sep

Business Inventories

1500

US

Oct

Existing Homes Sales

1530

US

w/e

EIA Energy Stocks

 

FN: 

Dec  Crude WTI (NYMEX)

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