Top Stories Last Week
• US Stocks Reached Record
US reached record again as the Fed started reducing bond purchases by $10 billion, a very slow pace of tapering. Last week, S&P index rallied 2.5%, and MSCI EAFE index climbed 3.0%. However, the MSCI Emerging Market declined 0.4%. Gold tumbled 2.9%, while the SPGC commodity index jumped by 2.0%. The bond markets were mixed. Barclays US Treasury index was down by 0.2%, while US high yield bonds were up by 0.4%.
• The Fed Started Tapering Bond Purchases
The Federal Reserve began tapering by reducing its bond purchases by $10 billion. Many economists expect the Fed will unwind the bond purchases in $10 billion increments over the next seven meetings before ending the program in December 2014. The FOMC said in a statement it will slow buying “in further measured steps at future meetings” if the economy improves as forecast. Unemployment fell to a five-year low of 7 percent in November as employers added 203K workers to payrolls. Inflation measured by the personal consumption expenditures index was 0.7 percent in October and has remained below the Fed’s 2% objective for almost a year and a half.
• Bank of Japan Kept Monetary Policy Steady
The Bank of Japan kept monetary policy steady and maintained its view that the economy is recovering moderately. The bank has been encouraged by growing signs that the benefits of its massive stimulus are spreading through broader sectors of the economy.
As widely expected, the BOJ voted unanimously to maintain its pledge of increasing base money, or cash and deposits at the central bank, at an annual pace of 60 trillion yen ($576 billion) to 70 trillion yen.
Top Stories to Watch This Week
• Christmas Holiday Week
US and European markets will close on Wednesday.
• US Durable Goods
US durable goods order is likely to rise by 1.7% in November according to economists.
• Japanese Inflation Rate
Japanese consumer price index is expected to rise 1.1% YOY in November.