Recap: Week Ending December 27, 2013
Global markets traded with little conviction in either direction this past week. Markets in both the US and Canada marched higher expect for a small profit taking session in US equities on Friday. The strongest gains this week were seen in Europe where the Frankfurt DAX closed up over 1.6%, and the FTSE in London closed up 2.1% for the week. The rally in European stocks comes after a strong sell off in the beginning of December. This week is one of the slowest weeks of the year as the markets closed early Tuesday and were fully closed Wednesday for Christmas day. Many markets around the world were closed for this event. With the shortened week, many investors and traders look to take a week of or either close positions for the years ends. As the markets slowed, little economic news was released making it a quite week all around. The important figure released was the US unemployment which came in at 2.923M with a previous reading of 2.877M and a consensus of 2.827M.
Markets around the world, especially in the US continue to grind higher as the US Federal Reserve announced in the previous week that they would slow their bond buying program known as Quantitative Easing, QE. The slowing or tapering as it is known will be reduced by $10billion from $85billion a month to $75billion. The reduction in the program has been seen as bearish for both bonds and equities. Despite such a negative sentiment, equities rallied as the taper was much less than expected. It appears the US Fed is testing the waters on how markets will react to a slowing QE. Since the announcement, equity markets in the US have rallied nearly 4% and have only had one down day. Following the announcement, the 30 year bond price has sold off over 1.6% and appears that the bottom is nowhere near. Bonds will possibly take an even bigger hit as QE slows even more and the market enters an era where QE is no longer present. Gold as faired no better closing down 1.65%. Gold is expected to take an even bigger hit as the inflation created by QE slows over the course of the next few quarters.
Stocks are only expected to march higher as the market will be again quiet in the upcoming week as it is once again a shortened week. Economic data will start off slow in the beginning of the week as markets will be closed Wednesday for New Years. Thursday, the US initial jobless claims will be released; the previous reading was 338K and the consensus reading is 334K. The ISM manufacturing PMI will also be released Thursday. The ISM consensus is 57, and the previous reading is 57.3. The week will be closed out Friday with an important Consumer Price Index for the month of December for the Euro. The previous year over year reading was 0.9%, and the upcoming consensus is 0.9%. No economic data from Canada will be released all week.