Today’s UK opening call provides an update on:
- Dovish Yellen sends indices higher for a second day;
- December taper unlikely;
- Eurozone revised October CPI due this morning;
- US manufacturing data released this afternoon.
European indices are expected to open higher on Friday, following another positive session in both the US and Asia over night.
The overnight rally in the US and Asia was largely driven by Janet Yellen’s testimony in front of the Senate Banking Committee. Yellen is currently the vice Chairperson at the Federal Reserve, but is expected to be confirmed as Chairman Ben Bernanke’s successor in the coming weeks. Bernanke term will come to an end on 31 January, leaving Yellen to take the hot seat on 1 February.
The initial rally came following the release of Yellen’s opening statement, which was seen by most in the markets as quite dovish. While Yellen didn’t go into any detail on when asset purchases would start to be reduced, in both her prepared statement and during the Q&A session despite the best efforts of the Senators, her overall tone certainly came across quite dovish.
Her comments suggest that a taper in September is unlikely, which means the first quarter of 2014 now looks most likely again. Investors had started to price in a December taper following the release of the October jobs report, which blew investors away with it’s very strong job growth during the government shutdown month, as well as upward revisions to both the August and September figures. Clearly in Yellen’s book, this one report doesn’t constitute the sustainable recovery that the Fed is after, something the markets are finding it very difficult to grasp at the moment.
Despite the positive start expected in today’s session, it is likely to be much quieter than the last couple of days. The economic calendar is looking very thin, with the only notable economic release this morning being the revised eurozone CPI figure for October. And you could argue that even this will be of little interest to investors considering we’ve already had the initial shock to the figure, when the preliminary reading was released last week, and the ECB has responded with a cut in interest rates.
The US session this afternoon is also likely to be a quiet affair, with only a couple of medium impact economic releases expected. First up we have the empire state manufacturing index, which is expected to rise to 5 in November, from 1.5 in October. Following this we have the industrial production figure for October, which is expected to show a 0.2% increase in October, from a month earlier.
Ahead of the open we expect to see the FTSE up 9 points, the CAC up 3 points and the DAX up 4 points.
About Craig Erlam
Craig Erlam is Market Analyst at Alpari (UK). He joined Alpari (UK) at the beginning of 2012 after four years in the financial services industry, including working at Goldman Sachs. Craig writes market commentary that regularly appears on websites including The Financial Times, Reuters, BBC, The Telegraph and FOX Business. He also provides insight and analysis for clients which he posts daily on Twitter and the Alpari (UK) website. You can also find Craig on YouTube where he gives short market updates, including charting analysis.