U.S. stocks dip as market recalibrates Fed expectations; Dow slips 0.47%

U.S. stocks dipped on Thursday as investors jumped to the sidelines to ponder when the Federal Reserve will begin unwinding its USD85 billion monthly bond-buying program, which boosts equity prices by driving down borrowing costs.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.47%, the S&P 500 index fell 0.38%, while the Nasdaq Composite index fell 0.28%.

On Wednesday, the Federal left its key benchmark lending target, the fed funds rate, unchanged at 0.25% and kept its USD85 billion monthly asset-purchasing program in place, which came as little surprise on Wall Street.

Still, the Fed's language came across as less dovish than markets were anticipating by omitting threats to the labor market mentioned in previous statements, which pressured stocks lower.

Solid data hitting the wire on Thursday solidified expectations that the Fed will begin tapering its stimulus programs in early 2014 as opposed to after March as once thought, and thus take away the monetary crutch that has pushed up stock prices for over a year.

Data released earlier revealed that the Chicago manufacturing purchasing managers’ index jumped to 65.9 in October from 55.7 in September. 

Analysts had expected the index to decline to 55.0.

The new orders component of the index jumped to a nine-year high of 74.3 from 58.9 in September.

Elsewhere, the Department of Labor said the number of individuals filing for initial jobless benefits in the week ending October 25 declined by 10,000 to a seasonally adjusted 340,000, in line with market expectations.

Leading Dow Jones Industrial Average performers included Exxon Mobil, up 0.91%, 3M, up 0.90%, and Boeing, up 0.71%.

The Dow Jones Industrial Average's worst performers included Visa, down 2.92%, JPMorgan Chase, down 1.99%, and American Express, down 1.52%.

European indices, meanwhile, finished largely higher

After the close of European trade, the EURO STOXX 50 rose 0.80%, France's CAC 40 rose 0.60%, while Germany's DAX 30 rose 0.26%. Meanwhile, in the U.K. the FTSE 100 finished down 0.68%

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Forex - Dollar gains on surging Chicago manufacturing gauge

The dollar firmed against most major currencies on Thursday data revealed that manufacturing activity in the Chicago region expanded at its fastest rate in 30 years in October.

In U.S. trading on Thursday, EUR/USD was down 1.14% at 1.3579.

Data released earlier revealed that the Chicago manufacturing purchasing managers’ index jumped to 65.9 in October from 55.7 in September. 

Analysts had expected the index to decline to 55.0.

The new orders component of the index jumped to a nine-year high of 74.3 from 58.9 in September.

The news boosted the dollar by fanning sentiments that the U.S. economy will pick up the pace of its recovery and eventually prompt the Federal Reserve to wind down its USD85 billion monthly asset-purchasing program, which keeps the greenback weak to spur recovery.

Elsewhere, the Department of Labor said the number of individuals filing for initial jobless benefits in the week ending October 25 declined by 10,000 to a seasonally adjusted 340,000, in line with market expectations.

The single currency weakened after data revealed that the euro zone's consumer price index fell to a four-year low in October, fueling concerns that the European Central Bank may trim interest rates.

Eurostat said consumer price inflation rose 0.7% in October, the slowest pace since November 2009, after rising 1.1% in September.

A separate report showed that the euro zone unemployment rate was at a record high 12.2% in September.

The greenback was up against the pound, with GBP/USD down 0.03% at 1.6036.

In the U.K., industry data showed that U.K. house prices rose 1% this month, more than the expected 0.7% increase after a 0.9% increase in September, which gave the pound support against the dollar.

The dollar was down against the yen, with USD/JPY down 0.20% at 98.33, and up against the Swiss franc, with USD/CHF up 0.86% at 0.9070.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.48% at 1.0429, AUD/USD down 0.28% at 0.9458 and NZD/USD trading down 0.06% at 0.8263.
Canada’s dollar strengthened after official data showed that the Canadian economy grew 0.3% in August, above expectations for growth of 0.2%.

The country's economy expanded 2% on a yearly basis, beating forecasts for an increase of 1.7%.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.71% at 80.34.

On Friday, the U.S. is to round up the week with a report from the Institute of Supply Management on manufacturing activity.

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Forex - GBP/USD dips on U.S. factory data, U.K. home sales support

The pound softened against the dollar on Thursday after a regional manufacturing barometer in the U.S. blew past expectations, though better-than-expected U.K. home sales figures cushioned the pound's losses.

In U.S. trading on Thursday, GBP/USD was trading at 1.6032, down 0.05%, up from a session low of 1.6006 and off from a high of 1.6068.

Cable was likely to find support at 1.5999, Wednesday's low, and resistance at 1.6208, Monday's high.

Data released earlier revealed that the Chicago manufacturing purchasing managers’ index jumped to 65.9 in October from 55.7 in September. 

Analysts had expected the index to decline to 55.0.

The new orders component of the index jumped to a nine-year high of 74.3 from 58.9 in September.

The news boosted the dollar by fanning sentiments that the U.S. economy will pick up the pace of its recovery and eventually prompt the Federal Reserve to wind down its USD85 billion monthly asset-purchasing program, which keeps the greenback weak to spur recovery.

Elsewhere, the Department of Labor said the number of individuals filing for initial jobless benefits in the week ending Oct. 25 declined by 10,000 to a seasonally adjusted 340,000, in line with market expectations.

In the U.K., industry data showed that U.K. house prices rose 1% this month, more than the expected 0.7% increase after a 0.9% increase in September, which gave the pound support.

The pound, meanwhile, was up against the euro and down against the yen, with EUR/GBP down 1.11% at 0.8469 and GBP/JPY down 0.22% at 157.68.

On Friday, the U.K. is to publish data on manufacturing activity, a leading economic indicator.

The U.S. is to round up the week with a report from the Institute of Supply Management on manufacturing activity.

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Forex - Euro lower vs. firmer dollar after Fed

The euro was lower against the firmer dollar on Thursday after the Federal Reserve was less dovish than expected on the economic outlook, fuelling speculation that it could start scaling back stimulus sooner than expected.

EUR/USD hit 1.3689 during European morning trade, the lowest since October 22; the pair subsequently consolidated at 1.3711, shedding 0.18%.

The pair is likely to find support at 1.3661, the low of October 22 and resistance at 1.3812, the high of October 29.

The dollar recovered after the Fed left its USD85 billion-a-month asset purchase program in place following its monthly meeting on Wednesday. The bank gave no clear indication whether it would start scaling back stimulus at the December meeting or continue it into the start of 2014.

"The housing sector has slowed somewhat in recent months," the Fed statement said. However, Fed officials stuck to the view that the economy is expanding "at a moderate pace" and said downside risks were diminishing.

Investors will now be looking ahead to the U.S. nonfarm payrolls report for October, due for release next Friday, to help assess the timing for a possible reduction in Fed stimulus.

The euro was lower against the yen, with EUR/JPY down 0.45% to 134.70. 

The Bank of Japan made no changes to its stimulus program on Thursday and reiterated that inflation will be close to reaching the bank’s 2% target by April 2015.

Elsewhere, the single currency was also weaker against the pound, with EUR/GBP sliding 0.18% to 0.8548.

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European stocks decline after downbeat German data; Dax down 0.20%

European stocks were lower on Thursday, after the release of downbeat German economic reports and as the Federal Reserve gave no clear indication on when it plans to scale back its stimulus program. 

During European morning trade, the EURO STOXX 50 edged down 0.15%, France’s CAC 40 fell 0.21%, while Germany’s DAX 30 slipped 0.20%. 

Data showed that the Gfk German consumer climate index declined to 7.0 in October, from a reading of 7.1 the previous month, confounding expectations for a rise to 7.2. 

A separate report showed that retail sales in Germany fell 0.4% in September, disappointing expectations for a 0.4% rise, after a downwardly revised 0.2% slip in August. 

In the U.S., the Fed left its USD85 billion-a-month asset purchase program in place and gave no clear indication whether it would start scaling back stimulus at the December meeting or continue it into the start of 2014.

"The housing sector has slowed somewhat in recent months," the Fed statement said. However, Fed officials stuck to the view that the economy is expanding "at a moderate pace" and said downside risks were diminishing. 

Financial stocks were broadly higher, as French lenders BNP Paribas and Societe Generale gained 1.93% and 0.58%, while Germany's Deutsche Bank climbed 0.41%. 

Earlier in the day, BNP Paribas reported an unexpected increase in third-quarter net income. 

Among peripheral lenders, Spanish banks BBVA and Banco Santander rose 0.17% and 0.46%, while Italy's Intesa Sanpaolo and Unicredit gained 0.86% and 1.06% respectively. 

Elsewhere, Air France-KLM declined 0.84% after saying earnings will be at the bottom of its 2014 projected range. 

In London, commodity-heavy FTSE 100 shed 0.39%,weighed by sharp losses in Shell, down 4.21%, after the oil company said third-quarter earnings dropped due to lower refining gains and disruptions in Nigerian output. 

Meanwhile, mining stocks were mixed. Rio Tinto added 0.17% and Glencore Xstrata gained 0.44%, while BHP Billiton slipped 0.28% and Fresnillo plunged 3.02%. 

In the financial sector, stocks were broadly higher as the Royal Bank of Scotland edged up 0.16% and HSBC Holdings climbed 0.48%, while Lloyds Banking and Barclays advanced 0.50% and 1.01% respectively. 

In the U.S., equity markets pointed to a lower open. The Dow Jones Industrial Average futures pointed to a 0.23% fall, S&P 500 futures signaled a 0.32% decline, while the Nasdaq 100 futures indicated a 0.48% drop. 

Later in the day, the U.S. was to release data on initial jobless claims and a report on manufacturing activity in the Chicago region.

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