FOMC Members see QE Ending in 2013
European stock markets closed mixed on Thursday with the exception of the Swiss SMI which soared 2.9% on account of the fiscal cliff deal. The Swiss Index had opened for business after New Year’s holiday and caught up with the rest of its peers. The London FTSE100 gained 0.3% with the rest of the indices pulling back slightly after making gains from the initial budget deal.
Overall, European shares rose to an 18 month high on Wednesday but Thursday’s trading session was more cautious as investors were keen to take their profits.
The Euro extended its losses against a strong USD on Thursday reaching a 3 week low. The Euro fell 0.6%, trading at $1.3108 to the Dollar. The US Dollar Index rose to a 3 week high of 80.116.
The US private sector data showed that employers added 250k new jobs in December, well above market expectations. Today’s economic calendar will see the all important Non Farm Payrolls being released. A better than expected data could spark a market rally but a sluggish data could result in a pull back.
The FOMC minutes meeting for December was released yesterday which pointed to the FOMC members eager to end the QE program. Upon release of the minutes, equity markets saw a sell off with investors being concerned on a possibly soon to end lower interest rates.
The question about when to end the quantitative easing program however had the FOMC members split with the consensus being either to let the program run until the end of 2013 while some members wanted the QE program to end by mid year.
The Aussie Dollar grew weak against the USD after the services industry sector from China showed a marginal decline. The AUD dropped to $1.0441, losing 0.2% from yesterday’s gain and trading 0.7% lower this week.
Bond markets dropped with the 10 year yields moving to the highest in four months. The AUD and the Kiwi Dollar were supported against the Yen in hopes that the BoJ would boost stimulus in order to weaken the Yen.
The Nikkei 225 average jumped 2.9% while the ASX 200 fell 0.4%. The Hang Seng Index was down 0.8% while the Kopsi lost 0.7%.
The HSBC Markit Economics Non manufacturing PMI dropped to 51.7 in December, from November’s 52.1. The US Dollar was seen to be growing strong climbing to a 2 and a half year high against the Yen and Gold.