Pre-market briefing: Too early to taper, says Chicago Fed president

October 18, 2013

CHICAGO (Oct 18)  Too early to taper, indicates Fed Evans - The Chicago Federal Reserve Bank (Fed) President, Charles Evans, in a speech indicated that it is too soon for the Fed to reduce the pace of its asset purchase program. Evans also stated that the data is still not strong enough to say that is time to taper the Quantitative Easing program.

Fed’s George supported tapering in October - Kansas City Federal Reserve (Fed) President, Esther George, reiterated that the Fed should commence pulling back its bond purchase program in October, citing increasing potential costs of the program and ineffectiveness of the easing policies.

Fed's Kocherlakota urged for more stimulus to boost the job market - Narayana Kocherlakota, President of the Federal Reserve (Fed) Bank of Minneapolis, dismissing any views for scaling back of bond purchases, called for more stimulatory measures to foster employment in the US, even at the risk of temporarily pushing the inflation above the Fed’s target of 2.0%.

US Market Snapshot -  US markets closed mostly higher yesterday, as investors got back to focus on corporate earnings and economic data. American Express jumped 5.1% on the back of upbeat Q3 profit. Newmont Mining and Randgold Resources advanced 4.6% and 3.7%, respectively, tracking rise in gold price. Peabody Energy gained 3.9%, after the company posted a profit in its Q3 2013. Verizon Communications advanced 3.5%, after posting positive Q3 2013 earnings and revenue. On the flipside, International Business Machines dropped 6.4%, after the company posted a decline in its Q3 revenue. eBay slipped 4.0%, a day after it issued a disappointing Q4 sales forecast. Goldman Sachs Group retreated 2.4%, after it registered a 20% drop in its Q3 revenue. The DJIA retreated marginally 0.01%, to settle at 15,371.7, while the NASDAQ advanced 0.6%, to close at 3,863.2. The S&P 500 gained 0.7%, to settle at 1,733.2.

Crude Oil - At 0330GMT today, Brent Crude Oil one month futures contract is trading 0.11% or US$0.11 higher at US$100.78 per barrel. Yesterday, the contract declined 1.58% or US$1.62, to settle at US$100.67 per barrel, as weekly oil stockpiles in the US rose more than expected as reported by the American Petroleum Institute and amid signs of progress in talks over Iran's nuclear programme.

Currency - At 0330GMT today, the EUR is trading 0.04% lower against the USD at US$1.3664. Yesterday, the EUR strengthened 1.09% versus the USD, to close at US$1.3669. The greenback weakened as investors speculated that the extension of the US debt-ceiling is only a temporary solution and as Fed’s policy makers’ support for the central bank to continue with its stimulus measures for a longer time, spooked investors confidence in the greenback.

At 0330GMT today, the GBP is trading flat at US$1.6149 against the USD. Yesterday, the GBP strengthened 1.27% versus the USD, to close at US$1.6149, after economic data released yesterday showed an increase in the UK retail sales numbers for September, further strengthening the notion of a rapidly recovering consumer confidence in the British economy.

Fixed Income - In the US, long term treasury prices rose, pushing the yields lower, amid speculation that Federal Reserve would not begin withdrawing its bond-buying programme in the near-term. Yesterday, yield on 10-year notes fell 8 basis point to 2.61%, while yield on 2-year notes lost 1 basis point to 0.33%. Meanwhile, 30-year bond yield fell 6 basis point to 3.66%.

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