Daily Market Report - 26/09/2014

Mark Carney reiterated the Bank of England's stance on interest rates and indicated that they will be rising before long. The Bank governor would not give a precise time scale, but saw the pieces falling in to place. “While there is always uncertainty about the future, you can expect interest rates to begin to increase”. The precise timing of the first rate rise is less important than our expectation that, when rates do begin to rise, those increases are likely to be gradual and limited. 
The rise, he said would not be set to a schedule but would "depend on the data" - but that the jigsaw was beginning to take shape.
With many of the conditions for the economy to normalise now met the point at which interest rates also begin to normalise is getting closer. In recent months the judgement about precisely when to raise Bank Rate has become more balanced. The conditions that Carney will consider will be inflation, the state of the jobs market and the housing market. Inflation is under the Bank's mandated target of two per cent, while unemployment is dropping.

American factories received more orders for machinery, communications gear and electrical equipment in August as an improving economy gave companies the confidence to expand. A 0.6 percent advance in bookings for non-military capital goods excluding aircraft followed a 0.2 percent decrease in July, which was smaller than previously estimated, according to data from the Commerce Department issued today in Washington. Another report showed firings remain low.

Growing sales paced by demand for automobiles and housing are prompting companies to invest in new equipment and hire more workers, which will give the world’s largest economy a boost in the second half of the year. Other data today showed a softening in consumer sentiment, reflecting a drop among lower-income households that may prevent more broad-based gains in spending.

The number of applications for unemployment benefits increased less than forecast last week as an improving economy prompted employers to retain staff, according to figures from the Labor Department today. First-time jobless claims climbed 12,000 to 293,000 in the week ended Sept. 20. They reached a 14-year low of 279,000 in mid-July.  

In a speech from Draghi yesterday he stated, ”inflation in the euro area has been on a downward path for a considerable period of time”. In August, inflation was estimated to have reached a low of 0.3% but was revised upwards to 0.4%. The ECB expect inflation to remain at low levels over the coming months, before increasing gradually during 2015 and 2016.

Key Announcements:

13:30pm - BST - USD - Final GDP q/q  4.6% 4.2%

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