US Equity Markets Fell As Investors Speculate Taper

The scene is being set for a imminent move by the Federal Reserve to taper its record stimulus. The budget deficit in the United States fell by more than expected in November as strength in employment market and record share prices saw a big rise in revenue. The deficit came in at $135.2 billion against a $172.1 billion deficit in November of last year. The Congressional Budget Office is forecasting further falls in the deficit as tax receipts rise. Revenues rose to $182.5 billion from $161.7 billion in November 2012. Not all the news was good. Although spending fell from last year it was still a staggering $317.7 billion.

The situation in Thailand continues to play out with Prime Minister Yingluck Shinawatra dissolving parliament to appease anti-government protesters who have now occupied the streets of Bangkok for the second month. The Thai Baht gained to a two week high in response to the development and is trading just above 32.00 against the U.S. dollar. However, the strength may be short lived given the uncertainty that continues to surround the Thai government. The King has endorsed the dissolution of parliament and elections are scheduled for February 2014.

U.S. equity markets have fallen in response to the announcement of a budget deal that left investors speculating that tapering would be more likely. The deal has cut automatic spending cuts by $60 billion over two years and is expected to reduce the budget deficit by between $20 to $23 billion. The deal has not yet passed Congress and does not raise the debt limit which is an issue that still needs to be addressed.The S&P 500 has closed 1.13% lower at 1,782.22. Earlier in Europe, bourses also fell with the EURO STOXX 50 losing 0.46%.

Commodity prices as a complex were mostly unchanged with the CRB index gaining only marginally by 0.09%. WTI has fallen from six week highs as supplies rose. WTI lost 1.2% to $97.40. Precious metals are unchanged with gold trading at $1,252 while silver is at $20.30. Copper has gained 0.6%. Agricultural commodities were mostly higher.