While you were sleeping Central bankers hold steady

Thursday 21st November 2013

Wall Street gained as monetary policy makers on both sides of the pond showed that they are committed to bolstering the pace of economic growth.

The European Central Bank is considering a negative rate for some business deposits if more economic stimulus is needed, Bloomberg News reported, citing two people with knowledge of the debate.

Meanwhile, US Federal Reserve Bank of St Louis President James Bullard said a potential taper for the central bank's bond-buying programme will be "on the table" at the FOMC's meeting next month.

"It's definitely on the table, but it's going to depend on the data," Bullard told Bloomberg in an interview. "A strong jobs report, I think, would increase the probability some for a December taper."

Even so, Fed Chairman Ben Bernanke clearly signalled that the supply of easy money won't be drying up any time soon.

"The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after the unemployment threshold [of 6.5 percent] is crossed, and at least until the preponderance of data supports the beginning of the removal of policy accommodation," Bernanke said yesterday in a speech in Washington.

In afternoon trading in New York, the Dow Jones Industrial Average gained 0.12 percent, while the Standard & Poor's 500 Index rose 0.19 percent, and the Nasdaq Composite Index advanced 0.32 percent.

Shares of JC Penney soared, last up 7.5 percent, as the department-store chain managed to ease the rate of decline in revenue. Shares in the retailer are down 47 percent this year, reflecting concern about its ongoing viability.

Shares of Lowe's, however, dropped, last 4.7 percent weaker, after the home improvement retailer provided an outlook that fell short of the mark.

"In addition to missing earnings-per-share estimates, interest rates are rising and housing is slowing, calling into question continued outperformance in this space in 2014," Janney Capital Markets analyst David Strasser told Reuters.

Sales of previously owned homes dropped 3.2 percent in October to an annual rate of 5.12 million units, according to National Association of Realtors data.

Separately, retail sales excluding automobiles, gasoline and building materials rose 0.5 percent in October, following a 0.3 percent gain in September, according to Commerce Department data.

"It reinforces the current narrative of sustained growth momentum in the recovery going into the last quarter of the year, even at a time when the economy was contending with the headwinds created by the government shutdown," Millan Mulraine, senior economist at TD Securities in New York, told Reuters.

In Europe, the Stoxx 600 Index added 0.1 percent, as did Germany's DAX. France's CAC 40 fell 0.1 percent, while the UK's FTSE 100 Index slid 0.3 percent.

The euro fell 0.7 percent against the greenback, while sliding 0.8 percent against the yen.

"If banks have to pay money in order to park cash with the ECB, it's going to make them reluctant to do so, and make investors reluctant to hold euros," Eric Viloria, senior currency strategist at Gain Capital Group in New York, told Bloomberg.

BusinessDesk.co.nz

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