This morning US markets regained ground lost earlier in the week, as news that the Federal Reserve was sounding out dealers about the possible size of monetary easing efforts reassured investors, who had been worrying about the size and impact of quantitative easing.
The Federal Reserve was reported to be conducting a survey of bond dealers about the likely size of central bank asset purchases over the next six months, according to Bloomberg News. The survey, conducted by the New York Fed, also asks about the time scale for the programme, and how often firms anticipate that the Fed will re-evaluate the programme. Deutsche Bank observed that 'what the market wants to hear is that the Fed is going to buy $1 trillion of treasuries'. The New York Fed survey coincides with a Treasury Department questionnaire that asks dealers about the likely outlook for bond market liquidity. The US Treasury said that it wanted to avoid any disruption to the $8.5 trillion market in US government debt.
Back in the UK, a newspaper report suggested that investment bank Barclays was musing over the possibility of leaving the UK, due to the raft of legislation and taxation that has been imposed on the financial sector. City AM said that the bank had discussed the idea among senior executives. Other firms, such as advertising group WPP and pharmaceutical company Shire, have moved offshore for tax purposes, but Barclays has encountered a number of penalties for moving offices that do not exist for other sectors. Even if it did move, the bank's retail arm would still be subject to FSA regulation, and contracts written under its previous status may have to be re-drafted. Barclays was the lone faller among major banks this morning, down 0.66% at 280.45p.
Oil giant Shell saw earnings jump 18% in the third quarter of 2010, to $3.5 billion, although this was below the $4.5 billion made in the second quarter. Shell said that it had sustained a $1.4 billion charge in the period, due to asset impairments and write-offs. Around $2 billion of assets have been sold so far in 2010, and $7-8 billion are anticipated in the remainder of 2010 and over the course of 2011. Chief Executive Peter Voser said that it was a 'better performance from Shell, achieved despite continued difficult industry conditions'.
UK house prices declined 0.7% in October, according to the Nationwide's house price index. The average home in the UK now costs £164,381, up 1.4% from a year ago. The quarter-on-quarter comparison showed that prices fell by 1.5% in October, and Nationwide's chief economist, Martin Gahbauer, commented that 'if recent trend in house prices were to continue through November and December, the annual rate of house price inflation would drop to between 0% and -1% by the end of 2010'.
Sentiment among European manufacturers has improved, according to the European Commission. The index of industrial confidence increased to 0 from -2 in August, ahead of the reading of -1 predicted in a Bloomberg survey. European consumer confidence held at -11, while economic confidence increased from 103.2 to 104.1, having been expected to remain at the August figure. Societe Generale cautioned that it was almost certain that economic growth on the continent was slowing, with a strengthening euro and a faltering global economy negatively affecting the European economy.
Looking ahead, US initial and continuing jobless claims for the weeks to 23 October and 16 October respectively will be published, and these will be keenly monitored for clues about the likely direction of the US economy. Ahead of this afternoon's opening, December futures for the Dow and S&P 500 are both 0.2% above fair value, suggesting a modest advance on opening for US markets.
