Alpari UK
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US Opening Call from Alpari UK on 22 May 2013
US futures flat ahead of Bernanke testimony
Today’s US opening call provides an update on:
* All eyes on Bernanke this afternoon;
* FOMC meeting minutes attract attention this evening;
* MPC vote remains at 6-3 against more QE in May;
* UK retail sales data disappoint in April.
US futures are pointing to a flat open on Wednesday, ahead of a closely watched Bernanke speech and the release of the Fed minutes from earlier this month.
There has been a lot of confusion in the markets recently about when the Fed will begin to phase out its asset purchase program. This hasn’t been helped by mixed comments members of the Fed, some of which have suggested a plan is being put in place to phase it out starting this summer, while others have suggested no such plan exists, and purchases will continue as they are until we see further improvement in the economy.
Clearly both of these can’t be true, which is why we’re seeing little direction ahead of Bernanke’s speech later. When you’re getting mixed messages from other members of the Fed, you can always rely on Bernanke to drop a pretty clear hint about what to expect next. So far, Bernanke has remained pretty dovish, which is what I expect more of today. However, any hawkish undertones from Bernanke could spark some panic in the markets.
I think it’s pretty clear at this stage that the main reason for the rally in the stock markets this year, that has seen both the Dow and the S&P hit all time highs, has been the large amounts of liquidity that has flooded the financial markets, in the form of QE3. The first clear sign that the Fed is prepared to scale back its purchases from the current level of $85 billion per month, will surely mark the end of the rally and the beginning of the long overdue correction.
It’s no wonder then that there’s a cautious tone in the markets ahead of Ben Bernanke’s speech and the release of the minutes from earlier this month. The minutes could provide additional clues as to when we can expect to see the Fed taper its purchases, with some members clearly becoming concerned about the costs and risks associated with such aggressive monetary policy.
They’re not the only ones concerned about the risks of ultra-loose monetary policy. I think it’s safe to say that there will be no increase in the asset purchase facility at the next Bank of England meeting in June, after the minutes from the May meeting showed that Sir Mervyn King failed once again to convince even one more policy maker to vote in favour of additional stimulus.
In the past, King has not had anywhere near as much trouble convincing the other policy makers to increase the asset purchase facility. Either the BoE Governor is losing his touch, or the other policy makers have lost interest with the same old response to the flat economy, and are waiting for Mark Carney to offer an alternative when he takes over as BoE Governor in July. Whatever the reason, it seems King will not get his way this time around.
Carney’s first meeting in July should be extremely interesting though. The UK economy is once again showing signs of weakness, with retail sales in April falling by 1.3% against expectations of flat growth. At the same time, inflation fell significantly in the same month, to 2.4%, down from 2.8% in March. The only question now is whether Carney will do a better job of getting the other policy makers on his side, than his predecessor has managed recently. Carney’s vote after all, is only one of nine, so he is still reliant on other policy makers to get his ideas through.
Looking ahead to the rest of today and the focus is likely to shift to the US, starting with the release of existing home sales, which are expected to show an increase of 1.5% in April. This comes following a 0.6% drop in March which may prove to be just a temporary blip in an otherwise strong recovery in the US housing market. Bernanke will then testify before the Congressional Joint Committee at 3pm EST, before the release of the Fed minutes from April at 9pm.
Ahead of the open we expect to see...
US futures flat ahead of Bernanke testimony
Today’s US opening call provides an update on:
* All eyes on Bernanke this afternoon;
* FOMC meeting minutes attract attention this evening;
* MPC vote remains at 6-3 against more QE in May;
* UK retail sales data disappoint in April.
US futures are pointing to a flat open on Wednesday, ahead of a closely watched Bernanke speech and the release of the Fed minutes from earlier this month.
There has been a lot of confusion in the markets recently about when the Fed will begin to phase out its asset purchase program. This hasn’t been helped by mixed comments members of the Fed, some of which have suggested a plan is being put in place to phase it out starting this summer, while others have suggested no such plan exists, and purchases will continue as they are until we see further improvement in the economy.
Clearly both of these can’t be true, which is why we’re seeing little direction ahead of Bernanke’s speech later. When you’re getting mixed messages from other members of the Fed, you can always rely on Bernanke to drop a pretty clear hint about what to expect next. So far, Bernanke has remained pretty dovish, which is what I expect more of today. However, any hawkish undertones from Bernanke could spark some panic in the markets.
I think it’s pretty clear at this stage that the main reason for the rally in the stock markets this year, that has seen both the Dow and the S&P hit all time highs, has been the large amounts of liquidity that has flooded the financial markets, in the form of QE3. The first clear sign that the Fed is prepared to scale back its purchases from the current level of $85 billion per month, will surely mark the end of the rally and the beginning of the long overdue correction.
It’s no wonder then that there’s a cautious tone in the markets ahead of Ben Bernanke’s speech and the release of the minutes from earlier this month. The minutes could provide additional clues as to when we can expect to see the Fed taper its purchases, with some members clearly becoming concerned about the costs and risks associated with such aggressive monetary policy.
They’re not the only ones concerned about the risks of ultra-loose monetary policy. I think it’s safe to say that there will be no increase in the asset purchase facility at the next Bank of England meeting in June, after the minutes from the May meeting showed that Sir Mervyn King failed once again to convince even one more policy maker to vote in favour of additional stimulus.
In the past, King has not had anywhere near as much trouble convincing the other policy makers to increase the asset purchase facility. Either the BoE Governor is losing his touch, or the other policy makers have lost interest with the same old response to the flat economy, and are waiting for Mark Carney to offer an alternative when he takes over as BoE Governor in July. Whatever the reason, it seems King will not get his way this time around.
Carney’s first meeting in July should be extremely interesting though. The UK economy is once again showing signs of weakness, with retail sales in April falling by 1.3% against expectations of flat growth. At the same time, inflation fell significantly in the same month, to 2.4%, down from 2.8% in March. The only question now is whether Carney will do a better job of getting the other policy makers on his side, than his predecessor has managed recently. Carney’s vote after all, is only one of nine, so he is still reliant on other policy makers to get his ideas through.
Looking ahead to the rest of today and the focus is likely to shift to the US, starting with the release of existing home sales, which are expected to show an increase of 1.5% in April. This comes following a 0.6% drop in March which may prove to be just a temporary blip in an otherwise strong recovery in the US housing market. Bernanke will then testify before the Congressional Joint Committee at 3pm EST, before the release of the Fed minutes from April at 9pm.
Ahead of the open we expect to see...
Read the full report at Alpari News Room
