US markets drift lower on better data, taper concerns

Friday, December 06, 2013

US markets have extended declines for a fifth straight session on encouraging economic data which continues to fuel speculation that the Fed will begin tapering in the coming months. Both the S&P 500 and DJIA closed 0.43% lower, as the S&P 500 fell to a two week low and the DJIA dropped to a three week low. Equities have been hit by a bout of profit taking in recent sessions as data releases this week point towards improving housing and labour market conditions. Yesterday’s released of initial jobless claims came in better than expected with 298k new claims in the week ending November 30th, well below the 320k expected by analysts polled by Bloomberg.

Comments by ECB president, Mario Draghi, hinted at possible policy action in 2014. After last month’s unexpected rate cut Draghi stated that the ECB had thought about pushing the deposit rate into negative territory, sending the euro towards 1.3450 before it quickly recovered and closed just above 1.3660, leading to a 0.54% gain throughout the day. Draghi went further to reiterate the commitment to ensure borrowing costs are kept low given the tentative economic recovery and persistently low inflation, which has been well below the target rate of 2% since the start of the year.

Investors have adopted a cautious attitude ahead of key data releases today as they anticipate that any further positive surprises will support the view that the Fed will begin tapering soon. With November non-farm payrolls and the unemployment rate as well as the University of Michigan confidence survey due this afternoon, trading could remain choppy throughout the morning as investors adopt a wait and see attitude.

Initial jobless claims continue to decline as the labour market improves

INJCJC Index US Initial Jobless 2013 12 06 07 47 57

Eurozone inflation has remained consistently below the 2% target rate since January

ECCPEMUY Index Eurostat Eurozon 2013 12 06 08 06 13



Events for today: Friday, 6 December 2013

0500

JP

Oct

Leading Index

0500

US

Oct

Dallas Fed PCE

1100

DE

Oct

Industrial Orders

1330

US

Nov

NF Payrolls & Unemployment

1330

US

Oct

PCE & Personal Income

1455

US

Dec

Michigan Survey

2000

US

Oct

Consumer Credit

View Economic Market Calendar

Topics: DJI, SP 500, US Fed, EUR
More from: Kash Kamal