News Column

Wall Street Higher Ahead of Federal Reserve Statement

October 29, 2013

Nick Fletcher, theguardian.com

federal reserve
Federal Reserve building (file photo)

As the US Federal Reserve starts its two day meeting, with a QE decision and statement due on Wednesday, a spate of data has done little to suggest the central bank will stop its $85bn a month bond buying programme in the immediate future.

The figures do not show the effects of the recent US government shutdown, so their relevance may be limited, but they paint a mixed picture. Producer prices showed a dip, while retail sales in September slipped 0.1% compared to expectations of a flat outcome.

The Case-Schiller house price index rose 1.3% month on month, to give a year on year gain of 12.8%, compared to a forecast increase of 12.5%.

Meanwhile US consumer confidence dropped to 71.2 from 80.2 in September and lower than the expected 75.

On the confidence figures James Knightley at ING said:

The Conference Board measure of US consumer confidence dropped sharply in October, presumably on the back of worries relating to the government shutdown/potential debt default and what this might have meant for growth, jobs and incomes.

Now that government is open again and debt default fears have passed we are hopeful that sentiment will recover. Unfortunately the uncertainty will have dampened growth in fourth quarter of 2013 and the clear worry is that politicians will again fail to come to an agreement in December on the budget. This means we will be faced with the very real prospect of another government shutdown in January with the US coming even closer to a debt default in February. This is not a good environment for economic activity and will make a delay of the Fed taper to late in the first quarter of 2014 or early in the second quarter of 2014 all the more likely.

With hopes that the Fed will sit on its hands for the moment, the Dow Jones Industrial Average has moved higher in early trading, up 45 points or 0.3%.

(c) 2013 Guardian Newspapers Limited.

Original headline: Wall Street higher ahead of US Federal Reserve statement


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Source: (c) 2013 Guardian Newspapers Limited.


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