Market Update: Abe’s growth strategy falls short of expectations – 05.06.2013

Source: Henderson Global Investors

US equities lost ground yesterday (S&P 500 -0.6%; Dow Jones -0.5%) as investors continued to fret about when the Federal Reserve (Fed)’s asset purchase programme might start being withdrawn. In a written speech, Federal Reserve Bank of Kansas President Esther George voiced her concerns that areas of the economy were becoming increasingly dependent on stimulus. At the Fed’s last three meetings, she has voted for slowing the Fed’s bond-buying.

In Japan overnight, the Topix fell 3.2% after Prime Minister Abe’s speech about his strategy for Japanese growth fell short of investors’ expectations. The lack of announcements on reforms surrounding the labour market and corporate taxes, and the failure to urge public pension funds to increase their equity allocations disappointed a market braced for fiercer economic reforms.

This morning, the FTSE 100 and Eurofirst 300 are in the red (-0.7% and -0.3%, respectively) as fears lingered about Ms George’s comments yesterday. Eyes will remain on the US; releases due today include the ADP employment report, factory orders, and the Fed’s Beige Book (information on current economic conditions by each Fed district).