• European shares edged up to 2 ½ month highs and ever closer to new 4 year highs on confirmation that the Eurozone has officially exited the long and painful recession that had been prevailing for the last 18 months. The EuroStoxx600 ended up 0.27%. Surprisingly, U.S. bourses fell despite a key Fed official suggesting more evidence was required before implementing the ‘taper’. The S&P500 fell 0.52%. • Better than expected performances by the Eurozone’s two economic powerhouses, France (+0.5%) and Germany (+0.7%) helped haul the 17 member Eurozone out of the 2nd leg of the double dip recession that has plagued the region since the winter of 2008. The economic community recorded +0.3% growth for Q2, slightly better than the +0.2% forecast by economists. Despite the Q2 result the European commission still expects the Eurozone to suffer a second full calendar year of falling output in 2013, with growth resuming in 2014. • The Fed’s Bullard repeats view that Fed needs more data before deciding to taper bond purchases. He also said that it is important for Fed credibility that it hit the 2% inflation target, that the QE program has not had a substantial impact on the dollar so far, and too big to fail banks are still a gigantic problem for the US – should think about making them smaller. • The release of the BOE MPC minutes threw up a surprise with a split vote (8-1) on the matter of forward guidance. One member voted against the extraordinary guidance seen recently under new Gov. Carney with the dissenter saying that more adherence should be given to the 2% inflation objective (Carney seems to be going for growth and appears prepared to allow inflation to rise over the 3% cap as a consequence). • There was a rash of UK labour market data to further fuel the debate with jobless claims coming in much better than expected, declining 29.2k v -15k expected. Another report showed UK employment grew by 69k in the 3 months to June, whilst unemployment fell by 4k it was not quite enough to budge the unemployment rate from 7.8%. (The BOE targets 7% unemployment before any thoughts of rate rises). • U.S. Producer Prices came in flat with core prices, which are seen as indicators of trends in inflation, rising 0.1% during the month, below the 0.2 % gain expected by analysts. Given Bullard’s comments above the release raises the spectre that the U.S. inflation trend could be too low for the likes of the central bank. • The USD traded a very narrow range with GBP the outperformer whilst the EUR failed to make any headway out of the better GDP result. GBP/USD jumped the best part of a cent following the slew of UK releases. Meanwhile EUR/USD actually fell in the wake of the GDP result drifting off from 1.3280 to 1.3230 before finding any semblance of support. • Gold continued its stellar performance of recent times rallying near 1% as the precious metal rose for the 5th time in 6 days. The move higher may well be tied to the announcement by the China Gold Association who said on Aug. 12 that purchases climbed 54 % to 706.4 metric tons in the first half from a year earlier. Demand surged 87 %for bars and 44% for jewellery. Silver rose 2.1 % to $21.787 an ounce. The price advanced for the fifth straight session, the longest rally since early March.
Posted on: Wed, 14 Aug 2013 23:06:58 +0000
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