The US Federal Reserve came out of its two-day policy meeting yesterday with news that it would terminate its third bond-purchasing program, known as quantitative easing or QE3.
Thursday, October 30, 2014
“There has been a substantial improvement in the outlook for the labor market since the inception of [the] current asset-purchase program,” the Fed said in its policy statement. “Moreover, the [Fed] continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability.”
Moving forward, the Fed will decide when to increase interest rates – a source of speculation for many economists. Most predict the rate hike will not arrive until the middle of 2015. The timing depends on the economic outlook for the US – a spike in employment or inflation would likely expedite the rate hike, while weakness in those areas could push the increase further back.
US indices open lower despite strong third quarter GDP
The US stock market opened lower on Thursday, although the Dow quickly rebounded. As of 9:32 AM EST, the Nasdaq lost 0.36%, the S&P 500 fell 0.25%, while the Dow gained 0.27% after initially falling 0.2%.
The mixed results followed Commerce Department data showing US gross domestic product expanded at a 3.5% annual rate in the third quarter, according the MarketWatch. The information showed investment spending from consumers and businesses, while government investment wasn’t a significant negative force. Most analysts predicted a 3% growth rate for the third quarter and hold that same expectation for the fourth quarter.
Additionally, the US is creating jobs at the fastest clip since 2009, the year the recession ended. Consumers exhibited the highest confidence level in seven years on the back of a gaining stock market and declining gas prices.
European indices fall after 3-day streak of gains
Stock markets across Europe dropped as banks were weaker than recent stress tests indicated, Bloomberg reported. The Stoxx Europe 600 declined 0.5%, while the Greek ASE and Portuguese PSI 20 both lost over 2.5%.
Europeans Bank Authority chair Andrea Enria said the European Central Bank’s stress test on eurozone lenders was not infallible. As a result, European stocks posted their first losses in three days.
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