U.S. stocks dip as market digests Fed comments; Dow down 0.32%

U.S. stocks slid on Monday after investors digested comments from Federal Reserve officials to try and determine when the U.S. central bank will begin tapering the pace of its USD85 billion in monthly asset purchases, which boost stock prices by driving down borrowing costs.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.32%, the S&P 500 index fell 0.47%, while the Nasdaq Composite index fell 0.25%.

Last Friday, St. Louis Fed President James Bullard said the Fed could decide at its October monetary policy meeting to taper its USD85 billion monthly asset-purchasing program.

The Federal Reserve will hold its next monetary policy meeting Oct. 29-30 but is not due to hold a press conference that day, which left many expecting a decision to taper asset purchases to come in December.

On Monday, however, Federal Reserve Bank of New York President William Dudley said monetary authorities want to be sure recovery is sustained before dismantling stimulus programs.

"In my view, the economy still needs the support of a very accommodative monetary policy.  Adjustments to that policy need to be anchored in an assessment of how the economy is actually performing, how financial conditions are evolving, and how this affects the longer-term outlook and the risks around it," Dudley said in prepared remarks of a speech he delivered Monday. 

"Our decisions on how to adjust our policy tools—for example, the pace of asset purchases and forward guidance with respect to the level of short-term rates—must be rooted in the ongoing flow of information that informs our judgments about the prospects for a sustainable recovery." 

Separately, Dallas Fed President Richard Fisher, a noted policy hawk, said the decision to keep the Fed's bond-buying program unchanged has damaged the institution's credibility.

Investors, meanwhile, spent the day digesting comments from all monetary authorities, which allowed for moderate declines on Wall Street.

Elsewhere, BlackBerry said it would be acquired by Canadian insurer Fairfax Financial for USD9 a share in a deal totaling USD4.7 billion.

On Friday, Blackberry shares plummeted after preliminary second-quarter results disappointed investors as did news the company plans to cut 4,500 jobs, or about 40% of its workforce.

Fiscal uncertainty in the U.S. dampened spirits as well.

Congress must agree on a spending package and lift the government's debt ceiling by the end of the month or risk throwing the country into default afterwards.

On Friday, the House of Representatives gave the green light to legislation to fund the government through Dec. 15, however, lawmakers voted to defund President Barack Obama's healthcare bill, the Affordable Care Act.

While the bill faces little chance of overall survival, the posturing sparked fears of brinkmanship and inaction that repelled investors from stocks ahead of a fiscal showdown brewing in the U.S.

Leading Dow Jones Industrial Average performers included UnitedHealth Group, up 1.79%, General Electric, up 1.21%, and 3M, up 0.95%.

The Dow Jones Industrial Average's worst performers included Goldman Sachs, down 2.61%, JPMorgan Chase, down 2.56%, and Coca-Cola, down 1.90%.

European indices, meanwhile, finished lower.

After the close of European trade, the EURO STOXX 50 fell 0.69%, France's CAC 40 fell 0.75%, while Germany's DAX 30 finished fell 0.47%. Meanwhile, in the U.K. the FTSE 100 finished down 0.59%.

On Tuesday, the U.S. is to release private-sector data on housing prices as well as a closely-watched report on consumer confidence.

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Forex - Dollar trims losses, stays weak on Fed support for stimulus

The dollar took back earlier losses stemming from a Federal Reserve official's defense of keeping stimulus programs in place on Monday though gains were short lived.

Comments from European Central Bank President Mario Draghi on considerations to provide low-interest loans to euro zone banks gave the dollar some support .

In U.S. trading on Monday, EUR/USD was down 0.20% at 1.3496.

The euro softened and the dollar firmed after Draghi said earlier that the European Central Bank may provide financial institutions with a new round of low-cost loans known as long-term refinancing operations to ensure interest rates stay low and inflation in target.

In 2011, the ECB began lending out EUR1 trillion in long term refinancing operations to spur recovery.

Elsewhere, data released earlier showed that the euro zone preliminary manufacturing purchasing managers’ index fell to 51.1 in September from a final reading of 51.4 in August. Analysts were expecting the index to rise to 51.8.

Conversely, the euro zone services PMI rose to 52.1, its highest level since June 2011, from 50.7 in August and well above expectations for a reading of 51.1. 

Across the Atlantic, the greenback came under pressure earlier after New York Federal Reserve President William Dudley defended the U.S. central bank’s decision to leave its USD85 billion in monthly asset purchases unchanged. 

"In my view, the economy still needs the support of a very accommodative monetary policy.  Adjustments to that policy need to be anchored in an assessment of how the economy is actually performing, how financial conditions are evolving, and how this affects the longer-term outlook and the risks around it," Dudley said in prepared remarks of his speech. 

"Our decisions on how to adjust our policy tools—for example, the pace of asset purchases and forward guidance with respect to the level of short-term rates—must be rooted in the ongoing flow of information that informs our judgments about the prospects for a sustainable recovery." 

Many market watchers were expecting the Fed to trim the amount of assets it purchases each month by about USD10 billion, which would have strengthened the greenback.

The greenback was down against the pound, with GBP/USD up 0.30% at 1.6053.

The dollar was down against the yen, with USD/JPY down 0.60% at 98.78, and down against the Swiss franc, with USD/CHF trading down 0.04% at 0.9104.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.26% at 1.0280, AUD/USD up 0.49% at 0.9444 and NZD/USD trading up 0.17% at 0.8376.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.01% at 80.53.

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Forex Trading Signal for 24th September 2013

                                                                                


Japan (Tokyo)                               United Kingdon (London)                        USA (New York)

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EUR/USD

 Down Trend :

 (1) SELL

E/P: 1.35015

T/P: 1.34600

S/L: 1.35600

GBP/USD

Up Trend:

(1) BUY

E/P: 1.60407

T/P: 1.60800

S/L: 1.60000

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Forex - GBP/USD trims gains, focus on Fed

The pound trimmed gains against the U.S. dollar on Monday, but remained supported as fresh uncertainty over whether the Federal Reserve will soon begin to taper its bond-buying program weighed on demand for the greenback. 

GBP/USD pulled away from 1.6072, the pair's highest since September 19, to hit 1.6031 during U.S. morning trade, still up 0.16%.

Cable was likely to find support at 1.5893, the low of September 18 and resistance at 1.6163, the high of September 18 and an eight-month high. 

The dollar found some support after New York Federal Reserve President William Dudley defended the central bank’s decision to keep its stimulus program unchanged last week, in comments on Monday.

Dudley said that adjustments to the Fed’s USD85 billion-a-month asset purchase program "need to be anchored in an assessment of how the economy is actually performing”. 

“The economy still needs the support of a very accommodative monetary policy,” Dudley added.

The Fed said last week that it wanted to see more evidence of a sustained economic recovery before it adjusted the scale of its bond buying program.

The decision surprised markets, which had been expecting a modest reduction to the scale of the bank’s bond buying program. 

Sterling was higher against the euro with EUR/GBP retreating 0.38%, to hit 0.8416. 

The euro came under pressure after Draghi said the European Central Bank is ready to launch a third round of Long Term Refinancing Operations if necessary. The comments came during testimony about the economy before the Committee on Economic and Monetary Affairs in Brussels. 

Earlier Monday, data showed that manufacturing output in the euro zone was weaker than expected this month, but this was offset by an improvement in service sector activity.

The preliminary reading of the euro zone manufacturing purchasing managers’ index fell to 51.1 in September from a final reading of 51.4 in August. Analysts had expected the index to inch up to 51.8.

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U.S. stocks mixed amid Fed, debt jitters; Dow Jones up 0.05%

U.S. stocks opened mixed on Monday, as fresh uncertainty over whether the Federal Reserve will scale back its stimulus program before the year end coupled with U.S. debt concerns led investors to remain cautious. 

During early U.S. trade, the Dow Jones Industrial Average eased up 0.05%, the S&P 500 index fell 0.19%, while the Nasdaq Composite index climbed 0.45%. 

U.S. stocks remained supported after the Fed last week said it wanted to see more evidence of a sustained economic recovery before it adjusted the scale of its bond buying program.

The decision surprised markets, which had been expecting the U.S. central bank to cut its USD85 billion-a-month stimulus program by USD10 billion to USD15 billion.

However, investors remained cautious after St. Louis Federal Reserve President James Bullard on Friday said the decision not to taper in September was “close” and indicated that there could be a small reduction in bond purchases in October. 

Separately, U.S. budget talks were continue this week with the aim of passing a resolution to fund government beyond October 1. 

In the tech sector, BlackBerry plunged 4.50% after the smartphone maker on Friday announced preliminary second-quarter results that disappointed market expectations. 

The company also said it will cut approximately 4,500 jobs, or nearly 40% of its workforce, as part of a massive restructuring plan. 

On the upside, Apple saw shares surge 5.26% after the company announced that sales for its new iPhone had set a record, with a record 9 million smartphones sold within the first few days of its launch. 

In addition, the tech giant said there were more than 200 million downloads of its new iOS 7 platform. 

Among Internet-related stocks, Facebook slid 0.82% after hitting record highs on Friday, when Cowen upgraded the social-networking giant to "outperform" from "market perform" and lifted the price target to USD53 from USD29. 

Other stocks likely to remain in focus included Microsoft, expected to introduce its next-generation tablets at an event in New York City. 

Across the Atlantic, European stock markets were lower. The EURO STOXX 50 slid 0.67%, France’s CAC 40 retreated 0.42%, Germany's DAX shed 0.33%, while Britain's FTSE 100 declined 0.45%. 

During the Asian trading session, Hong Kong's Hang Seng Index shed 0.56%, while Japan’s Nikkei 225 Index remained closed for a national holiday. 

Also Monday, data showed that the preliminary reading of China’s HSBC manufacturing purchasing managers’ index rose to a six-month high of 51.2 in September, up from 50.1 in August. Economists had forecast a reading of 50.9.

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Forex - Euro hits session lows vs. dollar

The euro fell to session lows against the dollar on Monday after European Central Bank President Mario Draghi said the bank is ready to offer the European banking sector more help if necessary.

EUR/USD hit 1.3480 during U.S. morning trade, the lowest since September 18; the pair subsequently consolidated at 1.3489, down 0.23%.

The pair was likely to find support at 1.3450 and resistance at 1.3546, the session high.

The euro came under pressure after Draghi said the ECB is ready to launch a third round of Long Term Refinancing Operations if necessary. The comments came during testimony about the economy before the Committee on Economic and Monetary Affairs in Brussels.

Meanwhile, New York Federal Reserve President William Dudley defended the central bank’s decision to keep its stimulus program unchanged last week, in comments on Monday.

Dudley said that adjustments to the Fed’s USD85 billion-a-month asset purchase program "need to be anchored in an assessment of how the economy is actually performing”. 

“The economy still needs the support of a very accommodative monetary policy,” Dudley added.

The Fed said last week that it wanted to see more evidence of a sustained economic recovery before it adjusted the scale of its bond buying program.

The decision surprised markets, which had been expecting a modest reduction to the scale of the bank’s bond buying program.

The euro drifted lower earlier after data showed that manufacturing output in the euro zone was weaker than expected this month, but this was offset by an improvement in service sector activity.

Data released on Monday showed that the preliminary reading of the euro zone manufacturing purchasing managers’ index fell to 51.1 in September from a final reading of 51.4 in August. Analysts had expected the index to inch up to 51.8.

However, the euro zone services PMI rose to 52.1, the highest level since June 2011, from 50.7 in August and above expectations for a reading of 51.1. 

Germany’s manufacturing PMI fell to 51.3 in September from a final reading of 51.8 in August, compared to expectations for an improvement to 52.2. 

The German services PMI rose to a seven month high of 54.4 from a reading of 52.8 in August. Analysts had expected the index to tick up to 53.1

The single currency remained supported after German Chancellor Angela Merkel's conservative party won general elections on Sunday, securing her a historic third term in office. Political party leaders were due to meet later Monday to discuss coalition talks.

The single currency fell to session lows against the pound and the yen, with EUR/GBP down 0.39% to 0.8414 and EUR/JPY falling 0.85% to 133.22.

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EUR/USD hits session lows after EZ PMI data

The euro fell to session lows against the dollar on Monday after data showed that manufacturing output in the euro zone was weaker than expected this month, but this was offset by an improvement in service sector activity.

EUR/USD hit 1.3509 during European morning trade, the session low; the pair subsequently consolidated at 1.3516, dipping 0.05%.

The pair was likely to find near-term support at 1.3500 and resistance at 1.3546, the session high.

Data released on Monday showed that the preliminary reading of the euro zone manufacturing purchasing managers’ index fell to 51.1 in September from a final reading of 51.4 in August. Analysts had expected the index to inch up to 51.8.

However, the euro zone services PMI rose to 52.1, the highest level since June 2011, from 50.7 in August and above expectations for a reading of 51.1. 

Germany’s manufacturing PMI fell to 51.3 in September from a final reading of 51.8 in August, compared to expectations for an improvement to 52.2. 

The German services PMI rose to a seven month high of 54.4 from a reading of 52.8 in August. Analysts had expected the index to tick up to 53.1

A separate report showed that manufacturing activity in France contracted at the fastest pace in three months in September, while activity in the services sector expanded for the first time in 19 months.

The euro remained supported after German Chancellor Merkel's conservative party won general elections on Sunday, securing her a historic third term in office. Political party leaders were due to meet later Monday to discuss coalition talks.

The dollar remained under pressure as uncertainty over the direction of Federal Reserve policy persisted, following last week’s surprise decision to announce no reduction to its USD85 billion-a-month stimulus program.

The Fed said it wanted to see more evidence of a sustained economic recovery before it adjusted the scale of its bond buying program.

The single currency fell to session lows against the pound and the yen, with EUR/GBP down 0.31% to 0.8422 and EUR/JPY falling 0.43% to 133.78.

European Central Bank President Mario Draghi was to testify about the economy before the Committee on Economic and Monetary Affairs in Brussels later Monday.

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Crude oil futures edge lower as traders shrug off upbeat China PMI

Crude oil futures edged lower to trade at the weakest level in four-weeks on Monday, as market players shrugged off the release of upbeat Chinese manufacturing data and continued to focus on receding concerns over a disruption to supplies from the Middle East.

On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD104.33 a barrel during European morning trade, down 0.4%. 

New York-traded oil futures fell by as much as 0.55% earlier in the session to hit a daily low of USD104.15 a barrel, the weakest since August 22. 

The November contract settled down 1.05% at USD104.75 a barrel on Friday.

Oil futures were likely to find support at USD103.56 a barrel, the low from August 22 and resistance at USD108.14 a barrel, the high from September 19.

Stronger-than-expected Chinese manufacturing data released earlier in the session failed to boost oil prices.

China’s HSBC Flash Purchasing Managers Index rose to a six-month high of 51.2 in September from a final reading of 50.1 in August.

The measure remained above the 50.0-mark for the second consecutive month, indicating expansion in manufacturing activity.

China is the world’s second largest oil consumer and manufacturing numbers are used as indicators for fuel demand growth.

Oil prices sustained their downward trend in recent sessions as fears over a disruption to supplies from the Middle East continued to fade away.

Oil prices surged to a 27-month high of USD112.22 a barrel on August 28 amid indications the U.S. was close to taking military action against Syria for its alleged use of chemical weapons against civilians. 

But prices have since lost nearly 6% after the U.S. and Russia reached a diplomatic solution on how to handle Syria’s chemical weapons on September 14.

While Syria is not a major oil producer, investors fear that the two-year-old civil war could spill over to affect oil supplies in nearby countries.

Reports that Libyan oil production is on the rise after protesters reopened access to facilities also added to the selling pressure, as did talk that oil output in Iraq is recovering.

Countries in the Middle East were responsible for nearly 35% of global oil production in 2012.

Uncertainty over the future of the Federal Reserve’s stimulus program also weighed.

Traders reassessed their expectations regarding the duration of the central bank’s bond-buying program after St. Louis Fed President James Bullard said Friday that a small tapering of bond purchases is “possible” at the Fed’s October meeting.

The Federal Reserve’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery shed 0.3% to trade at USD108.91 a barrel, with the spread between the Brent and crude contracts standing at USD4.58 a barrel.

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Euro zone manufacturing PMI falls to 51.1 in September

Manufacturing activity in the euro zone expanded at a slower rate than expected in September, while activity in the services sector improved at the fastest pace in 27-months, preliminary data showed on Monday.

In a report, market research group Markit said that its preliminary manufacturing purchasing managers’ index fell to a seasonally adjusted 51.1 in September from a final reading of 51.4 in August.

Analysts had expected the index to inch up to 51.8 in this month. 

On the index, a reading above 50.0 indicates industry expansion, below indicates contraction.

The report also showed that service sector activity in the euro zone improved to the highest level since June 2011 in September.

The preliminary services purchasing managers’ index rose to a seasonally adjusted 52.1 this month from 50.7 in August, above expectations for an increase to 51.1. 

Commenting on the report, Chris Williamson, Chief Economist at Markit said, “The overall rate of growth signaled by the Eurozone PMI remains modest, consistent with gross domestic product rising by a meager 0.2% in the third quarter.” 

He added that, “Policymakers at the ECB will no doubt view it as too early to change their stance on keeping policy on hold for an extended period.”

Following the release of the data, the euro was modestly lower against the U.S. dollar, with EUR/USD inching down 0.09% to trade at 1.3511.

Meanwhile, European stock markets were mostly lower after the open. The EURO STOXX 50 shed 0.25%, France’s CAC 40 was flat, London’s FTSE 100 slumped 0.25%, while Germany's DAX edged 0.1% lower.

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European stocks lower after German vote; Dax down 0.19%

European stocks were lower on Monday, following German Chancellor Angela Merkel's win in weekend general elections as renewed policital tensions in Italy weighed on investor confidence. 

During European morning trade, the EURO STOXX 50 retreated 0.31%, France’s CAC 40 eased 0.08%, while Germany’s DAX 30 slipped 0.19%.

Chancellor Merkel's conservative party won Germany’s elections on Sunday, securing her a historic third term in office. Political party leaders were due to meet later Monday to discuss coalition talks. 

Separately, investors remained cautious amid political tensions in Italy after Economy Minister Fabrizio Saccomanni said he will resign if the fragile coalition government favors tax cuts over European Union deficit spending limits. 

Earlier Monday, market research group Markit said that its preliminary German manufacturing purchasing managers’ index fell to a seasonally adjusted 51.3 in September from a final reading of 51.8 in August.

Analysts had expected the index to inch up to 52.2 this month. 

Financial stocks were mixed, as BNP Paribas added 0.12% and Societe Generale tumbled 0.80% in France, while Germany's Deutsche Bank dipped 0.01%. 

Among peripheral lenders, Spanish banks Banco Santander and BBVA slid 0.37% and 0.82% respectively, while Italy's Unicredit inched down 0.04% and Intesa Sanpaolo eased up 0.06%. 

Elsewhere, Fugro NV declined 0.45% after the deepwater-oilfield surveyor named Paul Verhagen as its chief financial officer and forecast sales of EUR3.7 billion in 2016. 

In London, FTSE 100 shed 0.31%, weighed by sharp losses in financial stocks. 

Shares in Lloyds Banking retreated 0.72% and Barclays tumbled 1.32%, while the Royal Bank of Scotland plummeted 1.36%. HSBC Holdings overperformed on the other hand, rising 0.35%. 

Mining stocks were also on the downside, as Glencore Xstrata declined 1.32% and Randgold Resources tumbled 2.16%, while Polymetal plunged 3.64%. 

Adding to losses, National Grid plummeted 1.73% after UBS downgraded the operator of energy networks' shares to neutral from buy, saying the price already reflects growth projections for the company. 

In the U.S., equity markets pointed to a higher open. The Dow Jones Industrial Average futures pointed to a 0.18% rise, S&P 500 futures signaled a 0.14% gain, while the Nasdaq 100 futures indicated a 0.19% increase. 

Later in the day, the euro zone was to release preliminary data on manufacturing and service sector activity. Meanwhile, European Central Bank President Mario Draghi was to testify about the economy before the Committee on Economic and Monetary Affairs, in Brussels.

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