Maybe it is the economy that is unclear

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The press conference's Q&A enabled reporters to tackle Yellen on the matter. When confronted with the fact that market pricing for interest rate is lower than the consensus of Fed members, Yellen said that each Fed member has a "considerable band of uncertainty" around his forecast. When questioned by what extent is the monetary policy driven by financial stability, Yellen said that she does not see stability as an important factor in shaping monetary policy at the moment. Reporters kept pushing the inflated asset bubble premise, as they suggested that the S&P 500 is at a record high. Yellen replied that she “does not see valuations outside of historical norms for equity prices broadly". Ultimately, Yellen was asked if there would be a considerable period between the end of the bond purchases and the first hike of the federal funds rate and specifically, whether March's six-month assessment is still good. To this, Yellen concluded with an undeceive response that there is "no mechanical formula whatsoever for what a considerable time means".

Evidently, the perception that everything is relative seems to be very valid in financial markets nowadays. It is easy to see why an additional 10 billion dollars tapering can be a step backwards. 

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2014 starts with markets uncertainty

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The year 2013 came to an end, and most trading sessions ranged from generally muted to somewhat edgy, but were unable to pick any specific direction. Some unexpected trading was provided by the gold and silver markets as the precious metals saw their price drop during the day to as low as $1,182 and $18.83 respectively. However, the dip quickly reverted shortly after, as a correction an hour later saw gold trading over pre-dip levels to as high as $1,209, while silver surged to nearly $19.8. A similar case was evident at the previous week’s Initial Jobless Claims data, released on Thursday. In addition to beating expectations for 344K new claims, with a print of 339K, the figure marked a hefty decrease from the previous week’s revised figure of 341K. It is mostly positive to see a declining trend of claims, but it is hard to miss the fact that the figure never really recovered from the Government Shutdown, as it Is now approximately at the same levels as five months ago. With the tapering already underway, positive claims data continued to raise concerns for reduced Fed purchases, continuing the last months’ ritual of positive labor data boiling down to pessimism on the equity markets. The S&P 500 lost -0.75% during the day, and the NASDAQ dropped approximately -0.4%. Thursday’s bear market did not last long, as optimism regained on Friday, for no apparent reason - leading the trading session seeing markets regain some of the previous day’s losses. Register at ANYOPTION and start trading TODAY!

On both sides of the Atlantic

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Wednesday sported an opportunity for U.S. data to shake the markets. Initially, the ADP employment change was released, and presented a very impressive increase of 215,000 jobs in the U.S. economy during November. When the promising data started advocating the tapering of QE3, it also sent the USD to strengthen nearly 0.5% versus the EUR. However, the day did not stop there, as the ISM Non-Manufacturing Composite Index was released shortly after, with less appeasing results. The negative 53.9 figure dispersed some of the QE3 tapering concerns, weakening the USD back to the 1.36 levels versus the EUR, where it started at. Equity reiterated their example for the “Bad news is good for stocks” paradigm, as the S&P500 gained approximately 0.7%.

Thursday saw a rather expected decision by the Bank of England to keep the official bank rate at 0.5%. The day’s protagonist, on the other hand, is probably the Department of Labor’s Initial Jobless Claims report, which indicated only 298,000 Initial Claims were submitted during the previous week. The last time this occurred was September and the figure has since surged to as high as 737,000, due to the Government’s shutdown. However, it seems that optimism regarding the labor data was already priced in the markets, as a result of the previous day’s positive ADP figure. Evidently, markets saw little change following the print.

Friday was somewhat of a different story. The day started with very positive indications regarding the U.S. labor market. These included U.S. Nonfarm Payrolls adding 203,000 Jobs in November, and perhaps more importantly U.S. Unemployment dropping to a level of 7.0%. Stock derivatives’ immediate response was to lose about 0.5%. Taper-induced trading was also evident in gold which took quite a blow and of course the USD which strengthened by almost 0.3% versus the EUR. Interestingly, things did not stop there - when the official trading started market opening was on average a tad higher than the previous day’s close. However, soon after that euphoria spread around equity markets, which lead both the Dow and S&P 500 to close their trading days more than a percentage point higher than the previous day’s close. 

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Black Friday optimism

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Friday presented opportunity for market optimism on both sides of the Atlantic. The Eurozone saw positive data published regarding the demand side, with prices increasing by an estimated 0.9%. Unemployment also provided its fare share as it decreased to 12.1%. That supported the German DAX index and the Spanish IBEX35, closing the week at +1.6% and +1.1% weekly increases respectively. At first, U.S. markets didn’t appear to need any data derived support; Although no positive figure was released in the U.S. on Friday, markets opened with a positive trend, due to optimism based on what appeared to be strong "Black Friday" consumer demand. The S&P 500 gained +0.2% throughout the trading day and the NASDAQ and DJIA complimented with similar figures. This reverted, however, as reports from leading U.S. retailers suggested local demand wasn't as strong as it seemed, leading both the Dow, as well as the S&P to conclude the day in negative territory. Register at ANYOPTION and start trading TODAY!