US equities pull back as FOMC minutes offer further insight

Thursday, November 21, 2013

A mixed session for Asian equity indices saw Japanese markets lift higher while Chinese stocks dropped after minutes from the FOMC’s last meeting signalled that the central bank was considering cutting bond buying in the coming months. Chinese markets were particularly hard hit by the suggestion that the US Fed would be scaling back support in the near term and faced further pressure from a weaker than expected flash manufacturing PMI reading, coming in at 50.4 in November which was below both the 50.8 expected and the previous months reading of 50.9. Japanese equity markets managed to recover losses accrued in the previous session as both the Nikkei and TOPIX gained 1.92% and 1.04% respectively, supported by a weaker yen after the BOJ announced a shift in monetary policy away from the management of the overnight collateralised call rate towards the expansion of the monetary base via JGB purchases in order to achieve their target inflation rate of 2%.

US markets pulled back slightly as details in the FOMC’s meeting minutes were largely in line with expectations. Details suggested that Fed officials were considering reducing their monthly bond buying programme “in the coming months” as economic data shows signs of a gradually improving economy. Considerations on how and when this would be effected without triggering an unwanted rise in interest rates were discussed, further reinforcing comments made by both Bernanke and Yellen regarding the Fed’s plans to keep interest rates near zero. Both the S&P 500 and DJIA pulled back slightly, erasing 0.36% and 0.41% respectively and key economic data due out later today will provide markets with further direction.

Oversupply in metals may be limited in the coming years as price declines this year prompt miners to cut back on capex. According to Bloomberg the world’s top four miners will reduce capital spending by 10% this year, helping bring the fundamental situation into balance. Accordingly, annual spending by the top 20 miners will drop by roughly a third of 2012 levels to $66bn in 2015. However, Goldman Sachs expect prices for gold, iron ore and copper to drop at least 15% next year as commodity markets face increasing headwinds with the price risks facing iron ore particularly high following the addition of significant capacity.

DXY gains on Fed comments as yen weakens on BOJ policy shift

 DXY Curncy DOLLAR INDEX SPOT 2013 11 21 08 18 00

10 year treasury yields rise to highest level since mid-September on FOMC minutes

 USGG10YR Index US Generic Govt 2013 11 21 08 32 58

Gold prices decline 2.5% as the yellow metal breaches $1,250 for the first time since July

XAU Curncy Gold Spot Oz D 2013 11 21 08 17 14


Events for today: Thursday, 21 November 2013

CN

Nov

HSBC/Markit Flash Mfg PMI

JP

Nov

BoJ Rate

0930

UK

Oct

PSNCR & PSNB

1330

US

w/e

Jobless Claims

1500

US

Sep

Lead Indicators

1500

US

Oct

Phil Fed

1530

US

w/e

EIA Nat Gas

FN: 

Dec  Coffee (NYBOT)

OE:

Dec Coffee (LIFFE)

View Economic Market Calendar

More from: Kash Kamal