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US Pre-Open Call - Jobless Claims eyed

Last updated 7/12/2012 4:20 AM ET (GMT -5) 0 Comments - Add your comment

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David Morrison

Market Strategist, GFT

Follow @DMorrison_GFT

We're anticipating a weaker open for US equities this afternoon, as stock index futures are all lower in early trade. Yesterday saw the release of minutes from last month's FOMC meeting. These added little to the statement that was released back in June. It confirmed that the committee was prepared to undertake further action if necessary (over and above the extension of Operation Twist), but it gave few clues what would trigger more stimulus. For this reason, there is very little chance that the FOMC will announce additional measures at its next meeting on 31stJuly/1st August. In fact, the minutes suggest that there would need to be a significant deterioration in the US economy before the Fed is prepared to extend its balance sheet with unsterilized asset purchases. Of course, it is entirely possible that the Fed is forced into action by a sudden failure of, say, a major international financial institution (or the collapse of the euro), but such events are currently viewed as low probability. For this reason, quantitative easing looks increasingly unlikely this year, especially ahead of the US Presidential Election in November. Following last week's terrible non-farm payroll reading, today brings the latest update on weekly jobless claims. The expectation is for a small increase in claims up to 376,000 after 374,000 last week. But do look out for revisions to the previous data. Typically, the prior week's number is revised higher. In fact, the last time there was a downward revision was back in February 2011. Upward revisions therefore flatter the headline release as we typically hear that claims were down or unchanged, but only when compared to a poorer number from the week before. Usually, these revisions are relatively minor, around three to five thousand (although that is not how fresh claimants would see it). But occasionally the revision is significantly bigger, coming in at ten thousand-plus. So watch out in case there is a sizable revision, as this is likely to unnerve investors - particularly in the light of yesterday's FOMC minutes. Looking forward, overnight we will see China's second quarter GDP, Industrial Production and Retail Sales. Following last week's surprise rate cuts, and slowing import growth as reported on Tuesday, there are fears that tomorrow's numbers will disappoint. GDP is the main concern, and analysts are bracing themselves for a sharp fall from last quarter's annualised growth rate of 8%.

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About The Author

David Morrison has worked in financial markets for over 25 years. He joined GFT in February 2009 to deliver commentary and research for derivatives products. Before then David had been instrumental in setting up two spread betting companies, managed trading desks, and implemented and ran successful risk-management strategies.

He has appeared on Bloomberg, Reuters, and Sky TV, and is widely quoted by financial newswires. He has written numerous articles covering economics and trading strategies using fundamental and technical analysis.