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Expectations for Fed tapering have been turned on their head post-shutdown, with the widely held view now being that we are unlikely to see any reduction in stimulus before December and a taper could quite easily be deferred into 2014.
That view has been re-enforced by disappointing non-farm payrolls data today, which fell well short of expectations. The consensus forecast had pointed to a rise of 180,000, but payrolls increased by just 148,000 in September.
With investors now believing that stimulus will continue to be pumped into the economy for months to come, stock prices improved on Wall Street, sending the S&P 500 to fresh highs earlier in the day. By early afternoon in New York, the S&P had gained 0.51% to 1754.6 and the Dow rose 0.43% to 15,458.
The diminishing likelihood of a Fed taper anytime soon has led to broad dollar weakness, with the euro advancing 0.8% against the currency.
Not all data was weak today though: construction spending climbed 0.6% in August, which was higher than expected and, more significantly, July’s outlays were far higher than originally reported, being revised up from a monthly rise of 0.6% to 1.4%. The year-on-year change for August stands at 7.1%, showing encouraging improvement from July’s 6.2% (once again, upwardly revised).