Precious metals are near unchanged from yesterday’s New York close, after recovering from a slight drift lower overnight. Physical gold demand in Asia is softer, mainly due to the draconian import restrictions by the Indian government.
In New York, the Dow and S&P 500 hit all-time highs in intraday trading, but closed down after an interview with market magnate Carl Icahn where he stated that he was “very cautious” about current market levels. He also said “This market could easily have a big drop”, because recent earnings are fueled by companies using low interest rates to buy back stock, not because they are performing well in the marketplace. “Very simplistically put, a lot of the earnings are a mirage,” he said.
Wall St dropped at this morning’s open over Icahn’s interview, and wasn’t helped by lackluster performance in Europe and Asia. The German ZEW economic expectations index rose to 54.6 from 52.8, but analysts were expecting a 55.0 reading, so weren’t impressed.
Markets weren’t helped when the Organization for Economic Cooperation and Development (OECD) lowered global growth forecasts, and blamed someone else besides Europe for a change. The OECD said that it’s major concern now was the political infighting and budget impasse in Washington.
The dollar is trading lower today, but losses were minimized by China promising to “eventually” stop regular currency market interventions on behalf of the yuan.
Tomorrow is the release of the FOMC October meeting minutes, and markets are expecting a lot of “taper talk” to be revealed, and are down pre-emptively on this expectation. Yesterday, Philadelphia Fed President Charles Plosser proposed that the Fed set a dollar cap on its balance sheet, and stop its $85 billion a month in bond buying when that limit was hit. Additionally, New York Fed President William Dudley told an audience that he was “more hopeful” and said that the government sequester budget cuts were having less of an effect on the economy. These two Fed officials may have been “warming up the crowd” for tomorrow’s release of the FOMC minutes, so that they aren’t as big a shock to the markets.
Asian markets were down on underperforming financial companies, and on a correction of the large recent gains seen after the Chinese government announced far-reaching fiscal reforms.