Spreadex Market Update
Savagery of tapering unprecedented bond buying in the U.S
It has become clear that debate surrounding the timing and savagery of tapering unprecedented bond buying in the U.S is more or less the sole focus of the markets. Economic data is now being scrutinised for clues that could have an effect on the tapering process. Importantly, with the tapering issue now rumbling on for many months, we are starting to see investors develop a sense of risk aversion.
The MSCI Emerging Markets Index has lost 4.6 percent this year while the S&P 500 is up 26 percent in 2013, set for the biggest annual advance since 1998, as the outlook for an end to Fed stimulus reversed a flow of funds into developing nations. This emphasizes how far gold has fallen since being viewed as an ultimate safe haven investment, with the precious metal losing over 25.5 percent of its value this year.
After a raft of encouraging data from the U.S, the likelihood of Federal Reserve tapering before 2014 has risen markedly. The number of economists who predict tapering at the December 17th-18th Fed meeting has doubled to 34 percent since the last survey on November 8th.
Headline European indices are indicating a bearish open, reflecting the disappointing session Asian markets experienced overnight. Japanese stocks snapped three days of gains as the yen strengthened 0.1 percent against the euro. The Asian currency, considered a haven from declines in higher-yielding assets, also advanced 0.1 percent against the dollar after climbing 0.4 percent yesterday. This advance comes despite significant buying of the dollar after the U.S budget agreement between Senator Patty Murray and Representative Paul Ryan.
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