01.11.13 Friday Evening

Despite maintaining unprecedented monthly bond purchases at $85 billion, markets seem to have been spooked after Fed Chairman Ben Bernanke’s comments that the U.S. economy is still going from strength to strength regardless of the partial government shutdown. The implications being that the Federal Reserve may taper stimulus before the anticipated March 2014 date.

Strong evidence for this is the fact that the MSCI Asia Pacific index slid 0.3 percent overnight despite manufacturing picking up across the region. From China to South Korea, official PMI’s rose more than estimated to an 18-month high, suggesting that we could be about to enter a stage of consolidation.

Market participant’s attention is now focused on the Fed’s timing and depth to reductions in monthly bond purchases. Whilst the government shutdown was expected to reduce economic growth by 0.3 percent this quarter, Fed policymakers moved to reassure investors that this was in fact not the case easing fears over the negative impact potentially caused.

U.S. data yesterday showed the biggest jump in a gauge of business activity in more than three decades and a drop in jobless claims, further highlighting the strength of the U.S. economy. Additionally, a report today is projected to show American factory output expanded. In a similar fashion to the Asian markets, U.S. headline indices are being weighed down by Fed tapering concerns. The S&P 500 slipped 0.4 percent yesterday, breaking a run that has seen the index climb 4.46 percent this month.

The FTSE 100 remains just 1.2 percent off the 13-year highs of May, having rallied 12 percent from June lows as investors turned back to equities encouraged by an extended period of equity-friendly easy monetary policy from central banks.

The MSCI Asia Pacific Index’s October advance pushed its price-earnings ratio to 13.7 times estimated earnings from 12.7 at the end of August, compared with 15.9 for the Standard & Poor’s 500 Index.

The euro weakened for a fifth day against the dollar as signs of economic weakness in the single currency bloc fuelled speculation the European Central Bank will cut interest rates as soon as next week. The 17-nation currency headed for its biggest weekly decline since February after reports yesterday showed the region’s inflation slowed and unemployment climbed to a record.

The euro area’s annual inflation rate declined to 0.7 percent last month, the least since November 2009, from 1.1 percent in September. Euro-area unemployment stood at a record 12.2 percent in September, separate data showed.

Investors will be watching data to gauge the health of the U.S. economy after the Federal Reserve said it needs to see more evidence of sustained improvement before paring bond purchases. Next Week we have a wealth of data but most noticeable is next Friday’s Non-Farm Employment Data.

Stock of the Week: African Barrick Gold

 

Being put on the chopping block provides a great incentive for getting the house in order and it looks like the fall in the price of gold, coupled with Barrick Gold’s avowed intent to sell or close underperforming assets, may at last be leading to a turnaround in their fortunes. Barrick’s 74% owned London listed African offshoot has reported what seem to be some positive Q3 figures suggesting it is at long last really getting to grips with its underlying costs situation and is even turning free cash flow positive.  

Next Week’s Notable Economic Data:

 

Monday –

• GBP – Construction PMI @ 09:30

 Tuesday –

 

• AUD – RBA Rate Statement @ 03:30
• GBP – Service PMI @ 09:30
• USD – ISM Non-Manufacturing PMI

 

Wednesday –

 

• GBP – Manufacturing Production m/m @ 09:30

 

Thursday –

 

• AUD – Unemployment Rate @00:30
• GBP – Asset Purchase Facility @ 12:00
• GBP – Official Bank Rate @ 12:00
• EUR – Minimum Bid Rate @ 12:45
• EUR – ECB Press Conference @ 13:30
• USD – Advanced GDP q/q @ 13:30
• USD – Unemployment Claims @ 13:30
• EUR – Draghi Speaks @ 19:00

 

Friday –

 

• CNY – Trade Balance
• CAD – Employment Change @ 13:30
• USD – Non-Farm Employment Change
• USD – Unemployment Rate @ 13:30
• USD – Prelim UoM Consumer Sentiment @ 14:55
• USD  - Fed Chairman Bernanke Speaks @ 20:30

 

Next Week’s UK Earnings:

Monday –

 

• HSBC Holdings 2013 Q3 Interim Management Statement
• Telecity Group 2013 Q3 Interim Management Statement

 

Tuesday –

 

• InterContinental Hotels Group 2013 Q3 Interim Management Statement
• Marks & Spencer Interim 2013/14 Earnings Release
• G4S Q3 Interim Management Statement
• Balfour Beatty 2013 Q3 Interim Management Statement

 

Wednesday –

 

• Firstgroup Interim Earnings Release

 

Thursday –

 

• RSA Insurance Group 2013 Q3 Interim Management Statement
• Inmarsat 2013 Q3 Interim Management Statement
• Halfords 2013 Interim Earnings Release
• Cable & Wireless 2013/14 Interim Earnings Release
• SuperGroup Q2 Trading Update
• Reed Elsevier Interim Management Statement
• J D Wetherspoon Q1 Interim Management Statement
• WM Morrison Interim Management Statement