Equities Overlook Poor Data on Central Bank Hopium

Global equities are not data dependent but central bank dependent.

Bullion.Directory precious metals analysis 31 October, 2014
By Christopher Lemieux
Senior FX and Commodities Analyst at FX Analytics

The S&P 500 hit another all-time new high, pushing over 2,010. Not because the economic data is showing “underlying” strength, like the Fed proclaims, but because the Bank of Japan (BoJ) is handing out free candy.

Global equities saw monster gains this Halloween, as the BoJ’s quantitative easing program just hit event horizon. So, as the FOMC minutes pin a hawkish tone to the markets due to underlying economic strength, the US economic data continues to miss the mark.

This week, pending home sales came under par and mortgage applications hit 19-year lows. Durable goods missed horribly across the mark.

Now, with analysts continuing to say the consumer is strong, spending data contracted .2 percent from a .5 percent expansion in the previous month. This was the first move lower in eight months, just in time as the Fed “finishes” QE. Demand for goods fell sharply, added doubt to the recent 3.5 percent expansion in Q3 GDP figure – largely rose on government spending.

The savings rate increased to 5.6 percent to a total of $732.2 billion. In an economy with so-called improving labor markets and a stronger consumer, the savings rate has steadily increased to levels not seen since 2012.

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