Julex Market Weekly 09-22-2013 | No Taper Yet

Top Stories Last Week

• Global Stocks Rallies as the Fed Restrained from Tapering

The Federal Reserve surprised markets by not reducing the size of its $85 billion per month bond-purchase program. World stock markets rallies as traders cheered the news. In the week, S&P index rose 1.3%, and MSCI EAFE index rallied 2.3%. The MSCI Emerging Market Index advanced 2.2%. However, gold changed very little, and the SPGC commodity index dropped 2.2%. The bond markets rose as the Ten-year Treasury rate moved lower. Barclays US Treasury index was up 1.4%, and US high yield bonds rose 1.4 % as well.

• The Federal Reserve Surprised Markets by Not Tapering

The slow economic recovery and weak job market kept the Federal Reserve, which defied market expectations, from pulling back on its monthly asset-purchasing program. The Fed said it was unsatisfied with the pace of economic growth and felt the timing was not right to make a change in quantitative easing. Fed Chairman Ben Bernanke said that while the economy is growing, “however the tightening of financial conditions in recent months, if sustained, could slow the pace of improvement in the economy and labor market.” He stressed that any Fed moves toward the tapering will be dependent on economic data improvements and the Fed would taper “at some point, possibly later this year.”

• US Inflation Rate Remained Muted

U.S. consumer prices barely rose in August, but rising rents and medical care costs pointed to possible risks in underlying inflation. The Consumer Price Index edged up 0.1% last month as the cost of energy fell and food prices remained muted. The CPI had risen 0.2% in July. In the 12 months through August, it increased at a slow 1.5% pace after advancing 2.0% in the 12 months through July. Excluding the volatile energy and food components, the so-called core CPI rose 0.1% after increasing by 0.2% in each of the past three months. Rents and medical care accounted for most of the increase in the core CPI.

• Euro Zone Inflation Rate is Below Target

Inflation rate in the euro zone slowed in August, in line with expectations, to hit 1.3% from a year earlier, down from 1.6% in July and significantly lower than the 2.6% recorded in August 2012. Inflation is significantly lower than the ECB’s target of 2%.

• US Existing Home Sales Hit 6-1/2 Year High

U.S. home resales hit a 6-1/2 year high in August as buyers hurried back to the market to lock in cheap borrowing costs amid rising mortgage rates, a signal of continued strength in the housing sector recovery. The existing home sales increased 1.7% to an annual rate of 5.48 million units last month, the highest level since February 2007. Thirty-year mortgage rates have risen in recent months after hitting a low of 3.35% in May. The rate for fixed mortgage rate was at 4.5% as of September 19, hovering near a two-year high.

Top Stories to Watch This Week

• Angela Merkel Won the Third Term in German Election

Angela Merkel won a landslide victory in Germany’s general election on Sunday, but her conservatives party appeared short of the votes needed to rule on their own and may have to convince leftist rivals to join a coalition government.


The UK economy will continue to improve, according to economists. The Q2 GDP is expected to rise 0.7%, higher than the Q1 growth of 0.3%.

• Japanese Inflation

Japanese CPI ex food and energy is likely to rise 0.3% from a year ago in September.

• US Durable Goods Orders

US durable goods orders are likely to remain flat in August.