Wednesday 21:05 GMT. A broadly encouraging batch of US economic data helped nudge US stocks to record highs and pushed the dollar to a six-month peak against the yen, although activity was subdued ahead of the Thanksgiving Day break.
US markets will be closed on Thursday and reopen for only half a day on Friday.
The S&P 500 equity index rose 0.3 per cent to a record close of 1,807. The Dow Jones Industrial Average edged up 0.2 per cent and also closed at a fresh peak.
In Europe, the FTSE Eurofirst 300 rose 0.5 per cent, but the Nikkei 225 in Tokyo slipped 0.4 per cent.
The dollar, meanwhile, was up 0.8 per cent against the yen at Y102.23 – the highest since late May.
Although some observers regarded the day’s host of economic releases as “second tier”, they assumed greater importance given uncertainty about when the Federal Reserve might start scaling back, or “tapering”, its stimulus measures.
The Chicago purchasing managers’ index– regarded by many as having a strong correlation with the closely watched national Institute for Supply Management manufacturing survey – eased to 63.0 this month, after a sharp rise to 65.9 in October.
However, the November reading was higher than most economists had expected – and there was a further improvement in the employment sub-index.
Positive news on the labour market front also came from a drop in initial jobless claims last week which fell to the lowest level since late September – although there were some concerns that the data may have been distorted by the timing of public holidays.
Meanwhile, an upward revision to the final reading of the University of Michigan’s November consumer confidence index boded well for the forthcoming holiday shopping season.
On a gloomier note, durable goods orders dropped
2 per cent on a headline basis in October, and – worryingly – a second successive drop in core capital goods orders ex-aircraft suggested business investment had started the fourth quarter on a soft note.
“All in all, labour market conditions are steadily improving but companies remain cautious towards investment due to ongoing political uncertainty,” said Nick Stamenkovic, macro strategist at RIA Capital Markets.
“We expect Fed tapering in March but another solid payrolls in November would increase the odds of a move as early as December.”
Indeed, there were some fairly upbeat forecasts for the November employment report, due out at the end of next week. Barclays is looking for a 200,000 increase in headline payrolls and for the unemployment rate to fall to a post-crisis low of 7.1 per cent.
Capital Economics, meanwhile, expects a 180,000 rise and a jobless rate of 7.2 per cent. “If jobs growth was broadly in line with our forecast, then the case for tapering in December would strengthen,” said Capital’s Paul Dales. “But equally, if the recent improvement proves to be nothing more than a mirage, the Fed would be more likely to hold fire for longer.”
US government bond prices fell in the wake of the data releases. The 10-year Treasury yield rose 4 basis points at 2.74 per cent, with the mood not helped by a weak auction of seven-year paper.
The German Bund yield rose a more modest 2bp to 1.71 per cent, as the GfK consumer confidence index rose more than expected in December – suggesting households could offer more support to growth in the last quarter of the year.
The euro, meanwhile, initially rose to a one-month high above $1.36 after Angela Merkel’s CDU/CSU alliance finally concluded an agreement with the main opposition SPD on a policy programme for a new ‘grand coalition’ government in Germany.
But the single currency subsequently gave back its advance to trade flat at $1.3572, although it held at a four-year high against the yen at Y138.53.
Sterling trimmed an early rise against the dollar but was still up 0.4 per cent at $1.6274 after UK third-quarter GDP growth was confirmed at 0.8 per cent, following 0.7 per cent growth in the second quarter.
The moderate rally for the dollar – the US currency was up 0.2 per cent against a weighted basket of counterparts – knocked the price of gold from an early high of $1,255 an ounce. The metal was down $5 at $1,238, not far off a recent four-month low.
In industrial commodities, Brent oil settled 43 cents higher at $111.31 a barrel, while US West Texas Intermediate fell to its lowest since June. Copper eased 0.6 per cent in London to $7,020 a tonne.
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