Equity markets are broadly higher this morning with investors seeming taking some comfort from the Fed‟s decision to hold interest rates at „exceptionally low levels‟ until the end of 2014 rather than mid-2013. Although interest rates are now on hold for longer, the decision looks to have slightly pushed back expectations of further Quantitative Easing.

The dollar lost some ground after the announcement with euro-dollar trading back above $1.31, whilst cable rallied from $1.5620 to $1.57. Bearing in mind that the cross had been down to $1.5520 after the publication of Q4 GDP data, the rally in sterling is fairly solid and we suspect reflects a view that the 0.2% fall in fourth quarter output will be revised higher.

Following on from yesterday‟s Fed meeting we have a busy set of US data releases this afternoon. The December Durables Goods orders report kicks-off at 1:30pm and a rise in aircraft orders is expected to push the headline index up by some 2% or so at least. However, core orders are expected to be a little softer and the ISM Manufacturing survey points to a 1% rise on the month, which is also in line with consensus. Even if December data remain solid, there are some concerns that the expiration of a 100% capital deduction on 31st December will lead to a fall in orders in the first quarter. The tax allowance was only for assets actually used, rather than just ordered, so the full impact of any adverse effect should have been seen earlier in the quarter rather than just in December, however the risk remains of a weaker outturn, which would lower expectations for Q4 GDP growth.

Initial jobless claims fell from 402,000 to 352,000 last week, although that seems to reflect some seasonal adjustment factors rather than any underlying improvement. It is therefore hardly surprising that consensus is looking for initial claims to rise this week back at around 370,000 which is a little above the current 4- week moving average rate.

New home sales are expected to rise by 1.9% in December to 321,000, but this could prove pessimistic as the NAHB survey pointed to a sharp increase in sales. So there looks to be some upside risk to consensus and we could see a much stronger number if the new homes series starts playing catch-up with the NAHB survey.

The decision by the Conference Board to restructure their Leading Economic Indicator means that we have less faith over forecasts for the time being. The ISM delivery times component has been replaced by new orders and the M2 money supply component has been removed. The entire back series will be rebuilt so that it can be compared to GDP, but today the series will largely be ignored.

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