Dollar slides, stocks rise on Fed expectations

Softness in the US jobs market suggests the timetable for Fed tapering is pushing further out, which has helped support share prices but weakened the dollar.

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).

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.