Surprisingly Hawkish Fed Minutes See Stocks Slide on the Open

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Stock Market Trading

: 21 February 2014

With weak Chinese manufacturing data encouraging a hesitant close in Europe, US stocks started yesterday's session on the back foot.

However, they managed to reverse course when the PMI numbers came in better than expected, thus tempering fears of a slowdown.

In addition, a $19 billion takeover deal which saw Facebook buying Whatsapp triggered hopes that the times of massive corporate deals could make a comeback.

The feel good factor saw the Dow Jones jump by 77 points to settle at 16,124.

That bullish close in the US fed through into some positive Asian sentiment and so we are expecting a positive handover on the open.

However, once European stocks have adjusted for the overnight moves, there is little of note on the economic calendar to really give them a nudge, with UK Retail Sales and PSNB data the only reasonable options.



Stock Market Trading

: 20 February 2014

European equities are set to slump on the open following negative overnight cues.

Some surprise hawkishness from the FOMC minutes has perked up speculation that interest rates in the US could head higher sooner than expected.

The minutes revealed that two Fed members saw the economy as being strong enough to warrant a rate hike.

This, coupled with a commitment for further monetary stimulus tapering, pushed the Dow Jones 90 points lower to 16,040.

In terms of economic data, the cold winter was blamed for yesterday's weak employment numbers, but the drop in equities was also exacerbated by disappointing housing figures.

Adding to the gloom this morning was another surprisingly negative HSBC Manufacturing survey overnight, spurring fear amongst traders of a wider slow down in China.



Stock Market Trading

: 19 February 2014

European equities are set to ease slightly on the open as traders lighten their positions and book profits ahead of central bank meeting minutes.

With a very light European economic calendar, the only real data of note for UK traders will be the BoE meeting minutes and the unemployment rate.

Now that Carney has added a host of other parameters to the Bank's principle of forward guidance, the unemployment rate may not have as much impact as initially expected.

However, following the previous month's surprise decline, any sign that the 'spare capacity' in the economy is being utilised will likely get traders taking on Carney's assertion not to expect a rate rise until the second quarter of 2015.

Last night, the Dow Jones dropped by 25 points to 16,130 as manufacturing in the New York area expanded by less than forecast.

The decline may have also been exacerbated by light profit taking after the steep rally following Fed Chair Janet Yellen's reassurances that stimulus will be withdrawn in 'measured steps'.

Later today, the release of the FOMC meeting minutes is bound to bring more transparency on the issue.



Stock Market Trading

: 18 February 2014

Yesterday's data pointing towards fresh demand for UK properties fuelled renewed optimism in the country's overall economic recovery.

This sent the FTSE 100 index 45 points higher to 6704, the strongest level in 3 weeks.

Whilst thin trading volumes as a result of the bank holiday in the US certainly helped the rise, high hopes for 2014 have remained central to the current rally.

Nevertheless, despite the FTSE's stellar outperformance yesterday, European stock markets are set to open flat once again on a lack of cues.

With the US out of action yesterday, it falls to Asia to provide the sentiment for this morning's open.

Some positive overnight words from the BoJ and RBA on the topic of their domestic economies initially buoyed the bulls, with the Nikkei 225 adding almost 3%.

However, the rest of the region didn't really latch on to the move, so there'll be a lacklustre handover to Europe.

Today's European session looks set to be dictated by the UK CPI and German/EU ZEW surveys.

Expectations are for UK CPI to fall below 2% which is giving the bulls some support as a period of below target inflation may give consumers a chance to increase their real purchasing power.

On the continent, following Friday's surprising Eurozone GDP figures, traders will be hoping that the German and Eurozone ZEW surveys can turn out to be equally positive.



Stock Market Trading

: 17 February 2014

The US has seen some mixed economic data of late, which has added to the fog of uncertainty surrounding their economy.

However, consumer confidence did manage to surpass expectations in February, indicating a positive outlook for economic expansion.

Despite the ongoing bad weather, this managed to send the Dow Jones higher on Friday, with the index gaining 149 points to 16,157.

During the overnight session, Japan posted some poor GDP data.

Whilst global economic sentiment doesn't seem to have been impacted, Europe is set to open flat as traders ponder where the latest rally has come from and what's in store for the next leg.

Following Janet Yellen's testimonies, it appears that she will be strictly following the line on tapering so the threat of capital flight from emerging markets hasn't been removed.

In fact, nothing has materially changed since we saw the emerging market sell off, but many of the major indices have certainly had a good crack at retracing the down move.

With the US out of action for Presidents Day and a light economic calendar in Europe, traders may sit today out and wait for tomorrow to really start the week.


By Jonathan Sudaria, 21 February 2014


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