On Friday, investors will get the latest reading on U.S. non-farm payrolls for November, and data may show the unemployment rate fell to 7.2 percent, matching the lowest level in five years. A jobs report tomorrow may show U.S. companies added the most workers since June. The central bank will release its Beige Book on economic conditions tomorrow.
The Fed has said it will monitor labor-market gains before deciding when to pare its $85 billion of monthly bond purchases. Policy makers will probably wait until their March 18-19 meeting, when they will reduce monthly bond purchases to $70 billion, according to the median estimate in Bloomberg?¡¥s survey on Nov. 8. They next meet on Dec. 17-18.
The European Central Bank and the Bank of England will both announce policy decisions on Thursday.
The Portuguese government raised 578 million euros by selling 70 percent of its postal service CTT-Correios de Portugal SA at 5.52 euros apiece, the top of the price range it indicated. This was the first initial public offering in the euro area's third-most indebted country since June 2008.
We have referred to the rally which has been underway in Western markets since early 2009 as liquidity fuelled and the correlation between the performance of the S&P 500 and size of the Fed Balance sheet has increased steadily over that time. Considering just how reliant the market has become on the provision of monetary stimulus, the fact that so many announcements are due this week has prompted some market participants to cull positions.
The Dow Jones Euro Stoxx 50 Index rallied impressively from its September lows to test the upper side of the 5-year base near 3000. In the process it developed an overbought condition relative to the 200-day MA and today¡¯s downward dynamic suggests a swifter process of mean reversion is unfolding.
As one of the better performing major European stock market, the DAX Index rallied for consecutive weeks to hit new all time highs over the last month. Today¡¯s downward dynamic suggests a peak of at least near-term significance and a countermanding upward move would be required to check current scope for mean reversion.
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