Tuesday Morning Cheat Sheet: 3 Stories Moving Markets

Markets were mixed in Asia on Tuesday. Japan’s Nikkei index fell 1.45 percent after the nation’s central bank announced that it would leave its monetary policy unchanged, despite some fears about rising borrowing costs. The yen strengthened to 96.9150 to the dollar. The Hang Seng fell 1.20 percent on the news, while the S&P/ASX 200 climbed 0.41 percent, its first gain in three days.

Markets were mired in red territory in mid-day trading in Europe. Investors seem to be increasingly concerned about inflated equity prices, and may be trying to exit risky positions while they can. Germany’s DAX was off 1.72 percent, London’s FTSE 100 was off 1.62 percent, and the Stoxx 50 index was off 2.08 percent.

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U.S. futures at 8:45 a.m.: DJIA: -0.76%, S&P 500: -0.96%, NASDAQ: -0.96%.

Here are three stories to keep an eye on:

1) Bank of Japan: The move was expected, but it still weighed heavily on markets. The Bank of Japan announced late Monday that it will leave its ultra-loose monetary policy untouched, suggesting that stabilizing bond prices and improving overall economic output are evidence of the policy’s effectiveness. Rising bond yields have caused some concerns, particularly in the nation’s housing sector, but Governor Haruhiko Kuroda tried to ease concerns by saying that he will act if borrowing costs spike.

The BoJ commented: “With regard to the outlook, Japan’s economy is expected to return to a moderate recovery path, mainly against the background that domestic demand increases its resilience due to the effects of monetary easing as well as various economic measures, and that growth rates of overseas economies gradually pick up, albeit moderately. The year-on-year rate of change in the CPI is likely to gradually turn positive.”

2) U.S. Retail Sales: Retail sales declined 2.7 percent in the week ended June 8, according to the ICSC-Goldman Store Sales report. The slump was attributed in part to heavy rain on the east coast. On the year, sales are up 2.2 percent, the lowest year-on-year rate in four weeks and well below last week’s year-on-year rate of 4.3 percent.

3) U.S. Small Business Confidence: The single most important problem facing small businesses in May 2013 was taxes, according to the most recent report from the National Federation of Small Business. The second most important issue was government regulations and red tape. But despite the headwinds, the NFIB reported that small-business owner confidence edged up for the second consecutive month to 94.4, its second-highest reading since the recession began.

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Bill Dunkelberg, NFIB Chief Economist, commented: “Small business confidence rising is always a good thing, but it’s tough to be excited by meager growth in an otherwise tepid economy. Washington remains in a state of policy paralysis, and while the stock market sets records, GDP posts mediocre growth. The unemployment rate remains in the mid-7s and it is departures from the labor force —- not job creation — that is contributing to its decline when it does fall. It’s nice to see confidence not shrinking, but there isn’t much to hang your hat on in this report. We are back to where we were in May 2012. Two good months don’t make a trend, but we can’t have a trend without them, so it’s a start.”

NFIB Small Business Optimism

Source: National Federation of Independent Business

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