Market Update 20/11/13

One line- Rally takes a pause ahead of Fed minutes today, equities, bonds and commodities sell off.

- The market rally spurred last week by Yellen's dovish comments has run out of steam as investors look to the Fed minutes today for clues about a potential tapering. Global equities are softer as are emerging market currencies and bonds. The S&P was off 0.2%, the Nikkei 0.3% and the FTSE is down 0.1% this morning. The yen hit a 4 year low against the euro as Japan published data that showed its trade deficit had unexpectedly expanded. Metals and energy are broadly lower. http://www.ft.com/cms/s/0/d976fb8e-5194-11e3-9651-00144feabdc0.html?siteedition=uk#axzz2lB9GOvWf

- The Bank of England minutes released today showed members believe the country is in a sustained recovery, with no major inflation risks. The minutes also showed that policy makers were in no hurry to increase rates. The Bank of England last week lowered its forecasts for inflation and said that unemployment could fall more quickly below its cited 7% level than they had previously thought. http://uk.reuters.com/article/2013/11/20/uk-britain-boe-idUKBRE9AJ0ES20131120

- Bernanke in an effort to allow tapering to occur without raising interest rates has said that the federal funds rate will likely remain low for a long time. Bernanke pointed to meaningful improvement in the jobs market but added that recent reports have been somewhat disappointing. He also said that interest rates rose too high over summer in part due to a perceived reduction of the Fed's commitment to meet its objectives. http://www.bloomberg.com/news/2013-11-20/bernanke-signals-fed-target-rate-to-stay-low-long-after-qe-ends.html

- China's central bank is looking to liberalise its financial services sector under Zhou Xiaochuan who promised on Saturday to "pull out all stops to deepen financial sector reform". The comments came with no timetable and the PBOC still intervenes heavily in the currency markets to prevent the yuan from appreciating. This though may be set to change if Zhou can enact his vision for a more freely floating exchange rate. http://uk.reuters.com/article/2013/11/20/uk-china-reform-idUKBRE9AJ09Z20131120

- Obama made a personal plea on Tuesday to leading senators to postpone new sanctions on Iran. The plea comes just ahead of the continuation of talks with Iran about its nuclear programme. The president however faces fierce opposition to the initiative from Republicans in the House. http://www.ft.com/cms/s/0/585195a2-516f-11e3-9651-00144feabdc0.html#axzz2lB9GOvWf

Data

S&P 1787.87 0.20%

FTSE 6678.13 0.30%
Nikkei 15,076.08 0.33%

EUR/USD- 1.3530 0.06%
USD/JPY- 99.96 0.18%
GBP/USD- 1.6151 0.19%

Gold- 1275.66 0.02%
Oil (Brent)- 108.10 0.34%

Copper- 315.60 0.14%

 

 

10 year yields

US- 2.71 (+1bps)
UK- 2.75 (+3bps)
Japan- 0.61 (-1bps)