U.S. Equity Futures Higher On Global Data; Fed Minutes Point To Tapering In Late 2013

xxU.S. equity futures are higher in premarket trading on Thursday following better than expect manufacturing data from Germany and China which comes one day after equities faced selling pressure yesterday following the release of minutes from the Fed’s July 30-31st FOMC meeting.

Global investors have been on edge, watching closely for signs that the Federal Reserve may gradually reduce their $85 billion monthly quantitative easing program that has helped to drive interest rates lower and push U.S. equities to new record highs over the summer.

The Fed statement underscored the view that Fed policy makers were in agreement with the Fed’s outlook for asset purchases outlined in the June postmeeting conference and in the July monetary policy testimony that acknowledged  if U.S. economic conditions improved as expected, the committee would moderate the pace of its securities purchases later this year and conclude the quantitative easing program by the middle of 2014.

“At the point, if the economy evolved around the lines anticipated, the recovery would have gained further momentum, unemployment would be in the vicinity of 7 percent, and inflation would be moving towards the Committee’s 2 percent objective” the Fed minutes revealed.

The Fed minutes also showed that Fed policy makers were satisfied that investors had come to understand the data-dependent nature of the Committee’s thinking about asset purchases while  they pledged to maintain their lower interest rate stance with the federal funds until the U.S. unemployment level falls lower to 6 1/2 percent and inflation remains well anchored.

“The Committee decided to keep the target range for the federal funds range at 0 to 1/4 percent and currently anticipates that the exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains about 6 1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer run goal, and longer-term inflation expectations continue to be well anchored” according to Fed minutes.

Since the July 30-31st Fed meeting, the U.S. Labor Department posted employment data that showed the unemployment level in July fell to 7.4 percent from 7.6 percent in June while 162,000 non-farm payroll jobs were added to the U.S. economy in July,  slightly missing estimates of 175,000.

Meanwhile, the non-farm payroll number for June was revised lower to 188,000 from 195,000

Overall U.S. job growth has steadily improved since the beginning of the Fed’s third round of quantitative easing in September of 2012.

During the past 12 months, employment growth has averaged approximately 187,000 jobs per month and 192,000 in the first half of 2013.

U.S. Jobless Claims

The latest jobless claims data this morning from the U.S. Labor Department showed that unemployment jobless claims rose by 13,000 to 336,000 compared to 323, 000 in the prior week.




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