Stock Markets Look to Non-Farms Data to Decide December Tapering Debate

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Stock Market Trading

: 06 December 2013

This is it, the day of the big jobs number.

For all of this week's jostling, this is what traders have been building themselves up for.

As always before such a high impact event, stock markets are looking to start fairly flat as both the bulls and bears limber up on the sidelines.

Traders seem to have gotten into the frame of mind that this figure alone will decide the fate of the Fed's tapering program and thus the equity markets.

Despite the overblown importance that they are attaching to this single figure, expect the reaction to be as if Bernanke himself had said that the taper will start in December or not.

Any weak figure is likely to get the bulls feeling confident that tapering has been kicked well into Janet Yellen's tenure.

After the Beige Book indicated that the US economy is 'expanding at a modest to moderate pace', the gross domestic product figures showed a rise of 3.6%, surpassing forecasts for a 3% increase.

On top of that, jobless benefit numbers decreased to 298,000 last week versus estimates of 328,000, which further fuelled speculation that the Fed might just pull the plug sooner rather than later.

In turn, the Dow Jones continued its slump, losing 81 points to 15,820.



Stock Market Trading

: 05 December 2013

Marginal declines are expected once more in Europe as trepidation builds ahead of Friday's payroll figures.

Yesterday's batch of conflicting data provided a heady roller coaster for traders to ride, and another busy day on the release front will test their stomachs again.

Whilst the two central bank meetings are not expected to make any changes on the monetary policy front, the Chancellor's Autumn Statement and a few dovish comments from Draghi should provide some volatility.

In addition, as always, overshadowing domestic European events is what is happening over in the US.

The timing of the Federal Reserve's tapering is still anybody's guess as spread trading investors desperately scrutinise the latest economic data for extra clues.

With that in mind, today's Preliminary GDP and Jobless Claims figures are set to add further fuel to the debate.

Despite Janet Yellen's dovish attire, fears are creeping in that Bernanke may try to engage in what would be regarded as a misguided Trichet-esque December tapering.

Having said that, we still feel that this scenario is at the far end of the probability distribution.

Nevertheless, ahead of the US Non-Farm Payrolls report, the markets are lacking any overwhelming conviction to move in either direction.

As a result, the Dow Jones finished rather flat yesterday around 15,900.



Stock Market Trading

: 04 December 2013

Who knows if good economic news will ever be good for the markets again, but for now the bulls seem to resemble Ebenezer Scrooge as improving economic fundamentals are fuelling fears of an immanent withdrawal of loose monetary policy.

Despite the marginally positive start, traders are feeling highly on edge after yesterday's better-than-expected auto sales reignited the debate about whether the Fed is getting closer to pulling the plug.

From a technical analysis point of view, some have been arguing that we are due for a pullback anyway.

However, the prospect of this week's data dump and central bank congregations sounding too positive seems to be sapping the bulls of any Christmas spirit.

As a result, the Dow Jones continued its retracement, dropping 101 points to 15,903.5.

Later today, new home sales data and the key Federal Reserve Beige Book will be scrutinised for further clues on the timing of tapering.



Stock Market Trading

: 03 December 2013

The Christmas spirit doesn't seem to have made its way to the bullish camp yet as another soft start is expected for European equities.

A host of reasons were given for yesterday's declines from the better-than-expected US Manufacturing PMI, which may see the start of tapering, to the drop in the price of gold.

However, it's the data and central bank meetings later this week which will dictate the sentiment in the run up to Christmas.

Today is the only light day of the week in terms of releases, so markets may continue to drift lower as traders stew over whether they and their respective economies have been good enough this year to deserve a Santa Claus rally.

The US stock markets saw a steady decline yesterday which accelerated during the final hour of trading and pushed the Dow Jones 105 points lower to 16,004.

On the one hand, economic data showed a surprise rise for the manufacturing sector but, on the other hand, Black Friday spending was lower than initially anticipated, with online sales the only bright spot.



Stock Market Trading

: 02 December 2013

Stocks in Europe are set to edge lower on the open as caution spreads amongst traders ahead of a busy week on the economic data front.

Despite the marginal declines, the bulls are hanging onto hopes that the historic norm of a December Santa Claus rally will hold true.

The recent gains have lost some momentum but expectations that the festive spirit will filter through into a bumper spending spree are keeping equities well supported.

Although overall spending on 'Black Friday' in the US was a little weaker due to a drop in sales at 'brick and mortar' stores, this hasn't dented bullish spirits.

The surge in online spending is expected to be replicated over here in the slightly more tech savvy European markets as 'Cyber Monday' gets underway.

Initially, US equities edged higher on the back of expectations for some good Black Friday results for retailers.

However, with a very light and shortened trading session, investors decided to take some profits off the table, triggering a sharp last minute sell off.

As a result, the Dow Jones closed 30 points lower at 16,097, and the index seems to be having a slow start ahead of a rather busy first week of December.


By Jonathan Sudaria, 6 December 2013


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