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A trader works on the floor of the New York Stock Exchange shortly before the closing of the market in New York, August 15, 2013. (LUCAS JACKSON/REUTERS)
A trader works on the floor of the New York Stock Exchange shortly before the closing of the market in New York, August 15, 2013. (LUCAS JACKSON/REUTERS)

Once again, markets look to Fed for guidance Add to ...

These are stories Report on Business is following Monday, Aug. 19, 2013.

Follow Michael Babad and The Globe's Business Briefing on Twitter. (Note: Michael Babad will return in September)

 

Fed still front-and-centre for traders

The more things change, the more the markets stay the same.

With little else on the calendar, traders were again weighing the possibility of the U.S. Federal reserve reducing stimulus starting next month.

The Fed is due to release the minutes of its last meeting on Wednesday which could again give some direction to the markets. Until then, it is wait-and-see.

“The new trading week has picked up pretty much where the last one left off, with equity markets struggling for impetus as indices drift lower in light volume trade,” Matt Basi, head of U.K. sales trading at CM Markets U.K. said in a morning note on Monday.

“A blank macro calendar today is unlikely to inspire much change to the recent pattern, with most traders awaiting Wednesday’s Fed minutes and any clues on the potential scale of the tapering plan that the market now seems convinced will begin in September.”

Key to Wednesday’s Fed minutes will be how much of the tone from the June meeting carries over.

“The key question is whether the tone of the minutes to the June meeting is carried over or significantly altered to reflect Fed acknowledgment of financial market pressures in response to its communications as it noted in the July 31st FOMC statement itself, said Bank of Nova Scotia’s Derek Holt.

“I think the outcome will be somewhere in the middle with a continued tone in favour of exiting QE3 but with the financial market response and risks to growth creating greater uncertainty over the timing in favour of later rather than sooner tapering.”

The S&P/TSX composite index lost 148.9 points to close at 12,588.02, and U.S. indexes added to losses racked up last week as the Dow Jones industrials was 70.73 points lower to 15,010.74, the Nasdaq composite index dropped 13.69 points to 3,589.09 while the S&P 500 index was down 9.77 points to 1,646.06.

“We could see investors turn their attention back to earnings season briefly this week, with some major retailers due to report second quarter earnings. Consumer spending makes up around two thirds of U.S GDP so these earnings are actually very important,” Craig Erlam, market analyst with Alpari U.K., said in a note.

“If like Wal-Mart last week, retailers revise down their expectations for the year, it would suggest that analysts and the Fed have once again overestimated how the economy will perform. This must have an impact on the Fed’s decision in September and is yet another reason why they shouldn’t seriously consider tapering until December, when the data will confirm whether or not the recovery is sustainable.”

Saks Inc. kicked off retail earnings this week, reporting disappointing sales and a deeper loss.

Saks, which is being bought by Canada’s Hudson’s Bay Co., reported same-store sales growth in the second quarter of 1.5 per cent. Analysts had been looking for an increase of 4.5 per cent. The U.S. retailer posted a loss of $19.6-million (U.S.) or 13 cents a share, compared with a loss of $12.3-million or 8 cents in the same quarter a year earlier.

Among the retailers reporting this week are Target Corp., Best Buy Co. Inc., Home Depot Inc. and Sears Canada Inc.

 

Toronto condos luring more renters

The Globe’s Tara Perkins reports this morning that increasing numbers of people are opting to rent condos in Toronto rather than buy.

That means rents are rising but sales and sliding and prices are stalling.

The number of condo rental leases that were signed in the Toronto area topped 5,000 for the first time during the latest quarter, coming in at 5,315, according to data to be released by research firm Urbanation on Monday. That’s up 20 per cent from 4,439 during the second quarter last year.

Read the full story here: Toronto condos luring more renters, driving up rents

 

Japan’s exports rise

Japan’s exports jumped in July from a year earlier at the fastest pace almost three years in a sign that a recovery in overseas demand and the often-touted benefits of a weak yen are finally starting to take hold. However, the trade balance was in deficit for the 13th consecutive month in July, as imports surged by the most in three years due to the weak yen and rising oil prices, that have made Japan’s energy imports ever more expensive.

Read the full story here: Japan exports rise at fastest pace in three years

 

Value of U.S. fuel exports surges

The value of U.S. fuel exports has grown faster than other goods and commodities during Barack Obama’s presidency, according to a Financial Times analysis, emerging as a driving force behind his goal to double exports by 2015.

The data offer further evidence of how the U.S. domestic energy boom – led by expanding oil and natural gas production and higher prices – is reshaping its economy.

Read the full story here: Value of U.S. fuel exports soars to $11.2-billion in first half of 2013

With Reuters, The Associated Press and The Financial Times

 

 

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