The Fed's Paws May Still Unsettle Investors

Overview: The failure of the S&P 500 to sustain even modest upside momentum yesterday is keeping traders on edge today, though another attempt on the upside is likely. Asian equities were mixed, with Chinese and Japanese shares lower. The Nikkei closed below the 21000 support level. European shares are struggling to hold on it early gains, though Italy's stocks and bonds have surged on reports of an agreement with the EU. The Bank of Japan and the Bank of England meet tomorrow, but neither is expected to change policy. That leaves today's FOMC meeting as the last big event of the year. The US dollar is trading heavily across the board amid market anticipation of dovish signals today.

Asia Pacific

Japan reported a larger than expected November trade deficit. The JPY737.3 bln deficit compares with a JPY450 bln deficit in October and forecasts for a JPY630 bln shortfall. Exports dried up, eking out a 0.1% gain from a year ago, down from 8.2% growth in October. Imports slowed to 12.5% from nearly 20% in October. To put the numbers in perspective, consider that over the past 12-months, Japan has reported an average monthly deficit of JPY65.6 bln. Last November the 12-month average was a JPY265.6 bln surplus. Japan's current account surplus, like Switzerland's, is driven by the investment income account, not the trade balance. Exports to the US rose 1.6% and 3.9% to Europe. However, exports to China slowed to 0.4%. However, the volume of exports to China fell 5.8%, while overall export volumes fell (1.9%) for the second decline in three months.

China's annual economic policy meeting continues, and it is here where new initiatives may be announced. Many observers bemoaned the fact that President Xi speech did not contain new stimulative measures. However, a speech to celebrate the 40th anniversary of the Deng Xiaoping reforms and the economic modernization of China is not the place to look for proposals on how to fix or reform that modernization.  Reports suggest that the US and Chinese officials will resume their face-to-face trade talks next month. 

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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