Expectations Rise after US Budget Gets House Vote

Expectations Rise after US Budget Gets House Vote

Submitted by adil on Wed, 12/18/2013 - 14:35

Experts have expressed the hopes that the major European indices will open slightly higher on this Friday. This is especially significant as the end to the week in financial markets is expected to be long and very quiet.  

In fact, the entire current week has been relatively insipid but it is not uncommon considering it is only the second week of the month. Usually, far fewer prices that have the ability to impact the economic data are released during this time of the month. Similarly, the meeting of the FOMC which is scheduled in next week has not helped the market either. The thought of the meeting has restrained all the Fed members who are not allowed to release any sort of official statements.

The financial markets have been lacking direction somewhat recently considering how important and influential these statements have been to them. Likewise, the aimless movement of the market becomes even more apparent if we keep in view the fact that the asset purchase program of the Fed is the main driving force in the market right now. Moreover, the equities have gained some weight this week because of the apparent lack of risk appetite among stakeholders ahead of FOMC meeting next week. In the wake of this condition, the mini-losses of investors are being considered as the necessary measures taken by them ahead of the possible taper.

We have also observed increased fears about Fed Taper in this week where the final nail in the coffin was the alarming figures of retails sales. The figure is 0.7% that is higher than expectations but the figure in the previous month was even higher. Similarly, the deal between Republicans and Democrats that was reached earlier this week after long negotiations between the two parties and passed comfortably by the House has also not helped the circumstances.

In the context of above discussion, the recovery of US economy is expected to get some momentum next years and there are some solid reasons for that. First of all, Senate will very likely pass the two year budget as it is not seemingly favouring any particular side. If this happens, then the last hindrance in the way of recovery of US economy will be lifted next year. It will also prevent US Government from involving in these matters frequently. However, we still need to debate on debt ceiling but there is still plenty of time for that as it is going to happen in February.

No major European company has reported any profit and no major pieces of data have been released this week. It means that there is not much to focus about Europe on this Friday. Similarly, the comments of different central banks of Europe such as the Bank of England and European Central Bank are going to have negligible impact on the markets as none of them is expected to tighten or loosen monetary policy in near future.