Market update: US tapering concerns deepen, sapping risk appetite – 05.12.2013

Source: Henderson Global Investors

US equities finished lower for a fourth consecutive day (Dow Jones -0.2%, S&P 500 -0.1%) although the declines were relatively modest. Concerns that the US Federal Reserve (Fed) will begin tapering its asset purchase programme very soon were intensified after the ADP National Employment report revealed that the private sector added more jobs than expected in November (215k versus consensus of 170k); the Fed’s Beige Book confirmed that the economy had expanded at a “modest to moderate pace”, and new home sales recorded their biggest increase in nearly 33.5 years in October. 10-year US Treasury yields closed at a near two-month high of 2.84% (yields move in the opposite direction to prices).

The tapering concerns were driving Asian trading overnight with major indices closing down. In Japan, shares struggled for a second day with the Nikkei 225 index slipping 1.5%. The Japanese government unveiled an 18.6tn yen (US$182bn) package of economic reforms, which failed to impress the markets as doubts remained on its economic impact. In this morning’s trading, European indices are flat to moderately lower. Investors await monetary policy decisions from the Bank of England and the European Central Bank today. In the UK the Chancellor, George Osborne, will be delivering his Autumn Statement. At the time of writing the FTSE Eurofirst 300 was down 0.1%, while the FTSE 100 was flat.