Sunday, June 23, 2013

US GDP; good for economy, bad for investors...
U.S. economy is anticipating yet another hectic week, with the Federal Reserve stimulus coming to an end depending on the performance of the economy. Next week, the third reading for U.S. GDP will be released among other anticipated figures to put some light on when will the Fed cut bond purchases.

Third and final reading for third quarter GDP is estimated at 2.4%, and to remain unchanged from the prior reading, which will probably give investors a clearer signal over the health of the U.S. economy.

Any economic data reports, and in particular the GDP update this week will be leapt upon for signs that the US economy is improving ,the trigger for Ben Bernanke , chairman of the US Federal Reserve, to start scaling back the central bank`s easy money policy. 

Analysts believe the Federal Reserve might start to scale back the record $85 billion in monthly purchases in September and reducing at as much as $20 billion. Note that Bernanke said last week that the Fed will start reducing stimulus before the end of 2013, and its end will be somewhere around mid-2014.

As for the Income report for May, it is expected to show some improvement in income and spending levels, as Personal Income levels are expected to grow 0.2% in May, after it stalled the previous month, whereas personal spending is also estimated to rise 0.3%, compared to the prior drop by 0.2%, the sharpest amount in almost a year, mostly because of decreasing car sales and demand for energy.
Other data this week includes May’s durable goods, the housing sector, and the weekly update for jobless claims. 

Stock Markets (Heading)
U.S. stocks fell for the week, with the Standard & Poor’s 500 Index dropping more than 5 percent from a record high, as equity markets extended declines on Friday day after Federal Reserve Chairman Ben S. Bernanke said the central bank may phase out stimulus.

Stock Markets await another volatile week as traders will closely watch important data in the U.S. and overseas markets. Stock markets will also hurt by another surge in bond yields U.S. government bond yields also remain at elevated levels. The 10-year Treasury yield was at 2.5% Friday, the highest since August 2011.

Investors have been bailing out of bonds and sending yields higher over the past month amid speculation that the Fed will soon taper its monthly bond purchases, known as quantitative easing. Elsewhere, China will also keep investors on edge. The Chinese central bank could start becoming more aggressive in its efforts to inject liquidity into the banking system, experts say, after inter-bank lending rates have soared.

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