Wall Street continues to drift ahead of the non-farm pay roll data due out later today. Analysts are waiting to see if the unemployment level in the US falls closer to 7%, and if it does whether that will trigger the Fed to taper. Yesterday's news that the third quarter GDP estimates for the US economy came in much stronger at 3.6% than analysts expected, added to the speculation that the Fed tapering cannot be far away. Traders across London and the US will be unlikely to be getting a sandwich at 130 today when the number comes out. They will be at their desks waiting with eager anticipation. There is the view amongst many that the first reaction from traders is often the wrong one. The S&P 500 has fallen for every day this week ahead of this number, if it does transpire that the announcement shows unemployment falling closer to 7%, traders may position themselves for further falls. The next Fed meeting is on the 17th and 18th of December, that is over a week away, there may continue to be market jitters ahead of it.
As well as the autumn statement from George Osborne, Mario Draghi appeared at his monthly press conference yesterday. After the expected announcement that the ECB were leaving interest rates unchanged, the press conference was once again one of disappointment. Mario Draghi came very much across as a man with his hands tied. He talked about the possibility that the inflation rate could rise next year in Europe, and then repeated that the ECB have many tools at their disposal to help stimulate the economy if needed. I think those comments on inflation surprised many; most economists see the greater risk to the euro zone economy is deflation. Once again when pressed on what conditions he felt would force him into using these measures he was suitably vague. One point that was well made by a journalist that there is a risk they leave it to late to act, rather as the government in Japan did 20 years ago. The euro rose yesterday against the US dollar on the back of the conference; this was despite the better than expected US GDP data.
There will come a point as there always does when the markets will call the ECB's bluff. The ECB has been seen to act at times of crisis. Over the past few years they have bailed out Greece, Ireland, and Portugal, which according to the letter of the law they should not have done. They announced the introduction of the LTRO in 2011, again something that was not part of the mandate, and then last year there were the comments from Draghi to do whatever it takes. The problem is every time we have to reach crisis point before they act, let's hope on the next occasion they will act before they are forced to.