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Home » Online Forex Trading Blog » US Data, Hope From China Boost Markets

US Data, Hope From China Boost Markets

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Resistance to Chairman Bernanke’s tapering announcement of last week subsided on Tuesday. When combined with some stronger than expected economic data from the US and some hope for the Chinese banking sector, equity markets staged a rally on Tuesday. The dollar posted substantial gains against the yen, the euro, the pound and a basket of currencies.

Mike Binger, of Gradient Investments, LLC, Summed up the sentiment of the day; “Investors have kind of come to the conclusion that ‘OK, we’ve made a knee-jerk reaction to what the Fed has said, and now we’ve taken some deep breaths and we can reassess.’”

Data from the housing sector, the Conference Board and the US Commerce Department supported the Fed’s contention that the economy was gaining momentum for a stronger and faster than expected recovery. This would suggest the tapering will progress, as Bernanke reported, toward the end of the year and wind down completely in mid-2014.

Last week, equity markets suffered losses with the abruptness of the Fed’s move but by Tuesday the shock appeared to be easing. Along with Bernanke’s tapering program the markets have been uneasy about the banking crisis in China. Banks have ceased short-term lending facilities.

The Conference Board, a private research group, surprised analysts by reporting that the US consumer confidence index rose in June to 81.4, far exceeding economists’ expectations. The index was revised downward in May to 74.3.

USA Equities endured their worst week in two months last week. Monday continued the decline. The Commerce report was just one piece of the data that caused Tuesday’s rise.

The S&P/Case-Shiller housing index reflected that new home prices reached a seven-year high in April. Prices increased by 12.1 percent from April, one-year ago. Another report indicated that May single family home sales hit their highest level in five years in May.

Steve Blitz, chief economist of ITG Investment Research interpreted the data; “The economy is leaning forward and the data underscore that it is time for the Fed to begin to move away from expanding its balance sheet.”

New home sales increased 2.1 percent to a seasonally adjusted annual rate of 476,000 units, the new high since July 2008. May marked the third successive month on increased home sales.

The elevated demand for housing has also spurred growth in manufacturing. Demand for new construction materials and household consumer goods remain high and are helping to offset cuts in government spending as a result of the sequestration, an unexpected result. In May, demand for durable goods increased on all fronts except for autos.

The USD and Equities

The MSCI’s all-country world equity index rose 0.82 percent. The FTSEurofirst 300 index climbed 1.45 percent, closing at 1,130.37, a solid 5.5 percent gain over the last three days.

The Dow Jones industrial average gained 100.75 points, 0.69 percent to close at 14,760.31 and halt three day declines. The S&P 500 gained 14.94 points, 0.95 percent, closing at 1,588.03. Nasdaq jumped 27.12 points, up 0.82 percent and closed at 3,347.89.

Asian markets maintained their volatility as news about a possible intervention in China kept investors nervous.

Against the yen, the dollar continued to gain ground touching 97.76, up 0.04 on the day.

The euro lost ground against the USD, settling at 1.3094, down 0.18 percent. The closely watched 10-year Treasury was down 15/32 in price, yielding 2.59888 percent. Bond futures reached 140.54, up 23 ticks from Monday.

A move by China could help global equities but the news continues to be vague.

US Data, Hope From China Boost Markets

Resistance to Chairman Bernanke’s tapering announcement of last week subsided on Tuesday. When combined with some stronger than expected economic data from the US and some hope for the Chinese banking sector, equity markets staged a rally on Tuesday. The dollar posted substantial gains against the yen, the euro, the pound and a basket of currencies.

Mike Binger, of Gradient Investments, LLC, Summed up the sentiment of the day; “Investors have kind of come to the conclusion that ‘OK, we’ve made a knee-jerk reaction to what the Fed has said, and now we’ve taken some deep breaths and we can reassess.’”

Data from the housing sector, the Conference Board and the US Commerce Department supported the Fed’s contention that the economy was gaining momentum for a stronger and faster than expected recovery. This would suggest the tapering will progress, as Bernanke reported, toward the end of the year and wind down completely in mid-2014.

Last week, equity markets suffered losses with the abruptness of the Fed’s move but by Tuesday the shock appeared to be easing. Along with Bernanke’s tapering program the markets have been uneasy about the banking crisis in China. Banks have ceased short-term lending facilities.

The Conference Board, a private research group, surprised analysts by reporting that the US consumer confidence index rose in June to 81.4, far exceeding economists’ expectations. The index was revised downward in May to 74.3.

USA Equities endured their worst week in two months last week. Monday continued the decline. The Commerce report was just one piece of the data that caused Tuesday’s rise.

The S&P/Case-Shiller housing index reflected that new home prices reached a seven-year high in April. Prices increased by 12.1 percent from April, one-year ago. Another report indicated that May single family home sales hit their highest level in five years in May.

Steve Blitz, chief economist of ITG Investment Research interpreted the data; “The economy is leaning forward and the data underscore that it is time for the Fed to begin to move away from expanding its balance sheet.”

New home sales increased 2.1 percent to a seasonally adjusted annual rate of 476,000 units, the new high since July 2008. May marked the third successive month on increased home sales.

The elevated demand for housing has also spurred growth in manufacturing. Demand for new construction materials and household consumer goods remain high and are helping to offset cuts in government spending as a result of the sequestration, an unexpected result. In May, demand for durable goods increased on all fronts except for autos.

The USD and Equities

The MSCI’s all-country world equity index rose 0.82 percent. The FTSEurofirst 300 index climbed 1.45 percent, closing at 1,130.37, a solid 5.5 percent gain over the last three days.

The Dow Jones industrial average gained 100.75 points, 0.69 percent to close at 14,760.31 and halt three day declines. The S&P 500 gained 14.94 points, 0.95 percent, closing at 1,588.03. Nasdaq jumped 27.12 points, up 0.82 percent and closed at 3,347.89.

Asian markets maintained their volatility as news about a possible intervention in China kept investors nervous.

Against the yen, the dollar continued to gain ground touching 97.76, up 0.04 on the day.

The euro lost ground against the USD, settling at 1.3094, down 0.18 percent. The closely watched 10-year Treasury was down 15/32 in price, yielding 2.59888 percent. Bond futures reached 140.54, up 23 ticks from Monday.

A move by China could help global equities but the news continues to be vague.

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About the Author -

Hiland DoolittleHiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses. Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.

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