The markets are an incredible aggregator of information. However, because of a tsunami of information, sometimes investors have difficulty in distinguishing the signal from noise.
Let us try to help. Here we look at three cases in which it seems many investors may be confusing the noise for the signal.
The markets have been more tumultuous than usual in recent days. There were two important developments for investors, but many likely missed.
First, yesterday the US reported the November budget deficit. At $56.8 bln, it was more than 10% less than economists’ projections. The budget shortfall in November 2013 was $135.2 bln.
The new fiscal year is two months old. Thus far, the budget deficit for the FY15 is $178.5 bln down from $225.8 bln in the first two months of the last fiscal year.
The US dollar has been consolidating for the past couple of weeks, and that phase appears to be ending. Next week’s economic data and events will likely underscore the divergent theme, which works in the dollar’s favor.
The consolidative tone that has been a general feature of the foreign exchange market continues today, leaving the US dollar broadly mixed. Even though the Fed’s new Labor Market Conditions Index improved more than expected, the performance of the Fed funds and Eurodollar futures indicate little impact on expectations for the first rate hike. This is to highlight that the main drivers of the dollar are not developments in the US but Europe and Japan.
The U.S. saw an improvement in domestic manufacturing and stronger employment data even as exports plummeted amidst weak international demand. In Europe, that decline indicated the rising threat of deflation, which is not deterring many Swiss voters from voting for more gold in their central bank.
On Monday, the Institute for Supply Management reported that U.S. manufacturing rose 2.4% month-over-month in October, while new orders rose 5.8% in the same period. The ISM said positive business conditions and greater demand were driving the push.
At present UK economic policy is being shaped by tremendous global financial crunch that has affected almost all major world economies. As part of UK economic policies quarterly forecasts of economic growth have been toned down to a significant degree.
Recent economic policy of UK has necessitated reductions in volumes of production and manufacturing, which is a worrying trend as far as David Kerns who is chief economist of British Chambers of Commerce, is concerned.
