US stock futures gained this morning, despite negative manufacturing data from China and Federal Reserve minutes revealing a hawkish mentality.
Thursday, August 21, 2014
Economists’ optimism prevailed partially due to falling unemployment claims. As a result, the S&P 500 is within reach of an all-time high. Futures for the S&P 500 and the Dow increased by 0.2% each, while the Nasdaq rose by 0.1%.
Jobless claims fall
The weekly US jobless claims report indicated that rates are dropping, as 14,000 fewer people filed for state unemployment benefits in the week ending August 16 than the prior week. The total came in at 298,000, just shy of the 300,000 expected by a group of analysts polled by Reuters.
The four-week mean of jobless claims fell by 8,500 between July and August, implying another month of employment gains. The improving labor market conditions will likely influence the Federal Reserve’s stance on interest rates, as the advancement could point to a recovering economy.
Federal Reserve hints at lowered stimulus
Yesterday’s minutes from the Federal Reserve’s July meeting revealed their economic stimulus efforts could halt sooner than expected, Bloomberg reported. The central bank has enacted three sets of stimuli since 2009, during which time the S&P 500 has nearly tripled.
Janet Yellen, chairwoman of the Federal Reserve, will give a speech tomorrow that will offer investors a better idea of the central bank’s direction. “The US economy is in reasonable shape. The task for central banks - and Yellen is at the forefront - is how to wean markets away from almost unlimited liquidity provisions when the economy is recovering but remains fragile,” Global Equities Economist Peter Gibson told Bloomberg.
It will be a delicate balancing act from the central bank to preserve the slow but steady growth while removing some of their safety nets.
Chinese manufacturing slumps
Today, an early Chinese manufacturing report for August revealed an alarmingly steep decline in growth, building on a trend set in July, according to the Wall Street Journal. Signs of the drop include fragile investment demand at home, a sudden fall in credit and three straight months of lower housing sales.
China’s disappointing data figures to be a wet blanket on hopes for a strengthening global economy. The country has a history of growth, and could have provided a jump-start to the sluggish economic movement worldwide. Unfortunately, the second-largest market in the world does not look poised to pick up by the year’s end.
“I'm really not sure the future looks so great, so we just try and control costs we can control,” Wu Sheng, a metal-products exporter in Shenzhen, China, told the Wall Street Journal. “I don't feel there's been much improvement from the policies. The government isn't doing enough to help business.”
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