Shifting Expectations about the Fed Support Equities

June 17, 2013

All the market talk over the past month about the Fed tapering quantitative easing had seemed premature, and as the FOMC meeting on Wednesday now draws near, investors are dumbing down their expectations for such a signalShare prices as a result recovered 2.7% in Japan, 1.2% in Hong Kong, 0.8% in India, 0.7% in Singapore and Australia and 0.6% in Malaysia and New Zealand.  In European trading, equities are so far up 1.9% in France, 1.5% in Germany, 1.4% in Spain, 0.8% in Britain and 0.6% in Italy.

A moderate reformer, Hasan Rowhani, won Iran’s presidential election.

Syria tops the agenda at the annual summit of G8 leaders, hosted by Britain in Northern Ireland.  Russia is isolated on this issue.

The dollar is unchanged against the euro, kiwi and sterling.  The greenback has risen 0.6% versus the yen and 0.2% against the Swiss franc but is down 0.3% relative to the Aussie dollar and 0.1% vis-a-vis the yuan and loonie.

The yields on 10-year German bunds and British gilts are 3 and 2 basis points higher, whereas the 10-year Japanese JGB yield is down a basis point.

Oil moved closer to $100, rising 0.8% to $98.58 per barrel.  Gold dipped 0.1% to $1385.80 per ounce.

The Reserve Bank of India, which had cut its borrowing and lending rates in January, March and May, left such unchanged this time, expressing concern about the current account deficit and the rupee.  Although WPI inflation has declined to 4.7%, upside price risks still lurk.  The key repo rate is 7.5%.

India’s trade deficit widened 13.2% between April and May, when such was $20.14 billion.

Euroland’s seasonally adjusted trade surplus narrowed to EUR 16.1 billion in April, which is lower than forecast, from EUR 18.1 billion but remains well above the EUR 10.4 billion monthly average in November – February.  The EUR 42.3 billion year-to-April surplus compares to EUR 2.0 billion in the first four months of 2012.

Labor cost inflation in the euro area accelerated to 1.6% in the first quarter from 1.3% in the final quarter of 2012 and was also above the 1.4% increase between 1Q11 and 1Q12.

The British Rightmove house price inflation rate ticked higher to 2.7% in June from 2.5% in May.

Italy recorded a EUR 1.91 billion trade surplus in April, 41% lower than in March.  The Dutch current account surplus in the first quarter was 35% bigger than in 4Q12.  Norway’s NOK 30.1 billion trade surplus last month was 13.2% wider than in April.

Czech PPI inflation slowed to 0.3% in May from 0.5% in April.  Danish producer prices were 0.1% lower than the month before and year before in May.

Japan’s tertiary index, a measure of service sector activity, was unchanged in April after dipping by 0.2% in March.  While the tertiary index was 1.4% greater than in April 2012, it only advanced 0.8% at an annualized rate in the half-year since October.

Singapore’s trade surplus increased to SGD 4.55 billion in May, 10.7% larger than in April.

Consumer confidence in New Zealand rose 5.2% in the second quarter to a 3-year high.  New Zealand’s services PMI index remained unchanged in May at a reading of 56.2.

Turkey’s seasonally adjusted unemployment rate of 9.4% in April was 0.2 percentage points higher than in March and than a year earlier.

In the United States, the monthly National Association of Home Builders index gets released, as does the Empire State manufacturing index.  Canada reports on securities transactions between it and the rest of the world.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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