ETX Capital Daily Market Bite, 16th August, 2013; European Stocks Retreat On Fed Taper Fears
August 16, 2013 9:26 am
August 16th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
Taper fear selloff to ensue Friday — US stocks and bonds dropped Thursday on expectations the Federal Reserve will start the first round of unwinding asset purchases next month. Better jobless claims out of the US fuelled the taper expectations. S&P500 registered biggest one day drop since late June. Asian markets fell in response overnight with Japan’s national index off over 1%.
In Europe this morning, we are flipping between small gains and losses across core indices on taper woes but unsurprisingly, value-hunting traders are attempting to buy the dip but upside momentum is heavily curbed. Attention on more US data — we have housing starts and the Michigan confidence report due this afternoon. Like yesterday, traders are likely to spend the session trimming positions, rebalancing portfolios on the prospect of reduced liquidity in the market place and managing risk just to get ahead of the Fed. It’s unlikely we will see many traders have a solid enough excuse to keep buying dips given that tapering fears keep a lid on moves to the upside.
That, and because major indices are at elevated levels and appear exhausted — a correction for the reason, should be expected. Likely we will see the S&P500 fall to the 1600 mark just before the September policy meeting, the FTSE100 to 6320 and the DAX to 8150. US dollar to be the standout winner here. Core government bonds to deteriorate in correspondence with the rout in equity markets. Additionally, with the second quarterly earnings season soon to wrap up, there’s little to incentivise equity markets in forthcoming weeks so Fed tapering will be the dominating mood.
August 16th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
Taper fear selloff to ensue Friday — US stocks and bonds dropped Thursday on expectations the Federal Reserve will start the first round of unwinding asset purchases next month. Better jobless claims out of the US fuelled the taper expectations. S&P500 registered biggest one day drop since late June. Asian markets fell in response overnight with Japan’s national index off over 1%.
In Europe this morning, we are flipping between small gains and losses across core indices on taper woes but unsurprisingly, value-hunting traders are attempting to buy the dip but upside momentum is heavily curbed. Attention on more US data — we have housing starts and the Michigan confidence report due this afternoon. Like yesterday, traders are likely to spend the session trimming positions, rebalancing portfolios on the prospect of reduced liquidity in the market place and managing risk just to get ahead of the Fed. It’s unlikely we will see many traders have a solid enough excuse to keep buying dips given that tapering fears keep a lid on moves to the upside.
That, and because major indices are at elevated levels and appear exhausted — a correction for the reason, should be expected. Likely we will see the S&P500 fall to the 1600 mark just before the September policy meeting, the FTSE100 to 6320 and the DAX to 8150. US dollar to be the standout winner here. Core government bonds to deteriorate in correspondence with the rout in equity markets. Additionally, with the second quarterly earnings season soon to wrap up, there’s little to incentivise equity markets in forthcoming weeks so Fed tapering will be the dominating mood.
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