Those with a dovish disposition have been cooing their approval of the Fed’s chairwoman-in-waiting for some time, and today they will finally see her take centre stage. Ahead of this important afternoon of commentary the EU has seen little to raise morale, as economic figures highlight why the ECB took the surprising decision to cut interest rates.
The first set of meaningful figures from Burberry has probably come a little too close to the company's announced CEO shake-up to reflect any longer-term changes, especially as Angela Ahrendts is not due to be replaced by Christopher Bailey until mid-2014. However it is worth noting that the company's six-month revenue continues to climb, and for the first time it has seen revenue break the £1 billion mark.
UK high streets continue to be tough environments in which to run profitable operations, and WH Smith has seen revenue fall by 4%. This is an issue further highlighted by this morning’s 0.7% drop in UK monthly retail sales figures.
Serco’s annus horribilis goes from bad to worse, as the firm has announced that operating margins are worse than expected and profits are set to come in lower than in 2013. With the investigation still ongoing into previous misdemeanours, and a ban from any future government contracts in place, it is difficult to see a silver lining. This is obviously a view shared by the markets, as by mid-afternoon the company was off by over 16% - easily the biggest faller in the FTSE 100.
US markets analyse Yellen's words
The markets have been given the opportunity to read Janet Yellen’s comments yesterday, ahead of today’s testimony in front of the senate. The sentiment was very much a continuation of the current status quo: unemployment needs to fall and economic productivity to improve. The gist was really: 'so far so good, but we need to do more'. The statement that 'these figures reflect an economy far short of its potential' does give confidence to those hoping for a continuation in the dovish way. This is effectively the last hurdle that Janet Yellen needs to clear before her ascent to become head of the Fed. Markets would love her to elaborate on how and when the current monthly $85 billion debt-purchasing programme will be tapered, however this looks unlikely.
Gold halts slide
Gold’s $100 slide over the last couple of weeks looks like it might have come to an end. However, sentiment towards the precious metal is far from bullish, and it still has a lot to do to prove that its longer-term trajectory is not southward. Copper's three-month tryst, dancing between $3.20 and $3.35, has finally come to an end as the metal has broken down below its support. As global manufacturing figures have struggled and the eurozone continues to put out disappointing figures, the pressure has finally told.
Euro and dollar tussle
The tug of war that is EUR/USD continues, following last night’s dovishness from Janet Yellen and this morning’s poor economic picture from the EU, and then the return to more Yellen-inspired dovishness in the afternoon. Sneaking up on traders, away from the Western markets' focus, has been USD/JPY. Rising like a phoenix from the flames, it has charged above the Y100 level. How long it can handle these heady heights is another question entirely.