— This is the script of CNBC's news report for China's CCTV on December 9, Monday.
Welcome to the CNBC Business Daily.
We got an upbeat jobs report from the U-S on Friday.The unemployment rate fell to a five-year-low of 7%. While the economy generated 203,000 jobs last month. And follows a bigger than expected rise in October's payroll report. Pointing to more signs that the US economy is well on the road to recovery.
Now all eyes will be on the Fed's two-day meeting which starts next Tuesday. Most traders say that the Central Bank could start tapering no later than March. With a handful betting that the Fed could act as soon as next week. And after some signs of a lackluster start to the holiday shopping season. Investors will pay close attention to November retail sales data due on Thursday.Analysts polled by Dow Jones see that figure advancing by 0.7% A tad higher than October's 0.4% increase.
So could the Fed announce a policy change this week? And if they do, what shape and form will it take?
Here's what the analysts had to say:
[Soundbyte on tape by David Kuo CEO, The Motley Fool] I talked about quantitative easing as being like a set of water wings that you put on a child. And the reason why you put water wings on a child is to instil confidence and to keep it afloat. But at some point in time you're going to have to take those water wings off. If you look at the American economy, there's confidence and it's being kept afloat. So now you need to take those water wings off, because you cannot keep those water wings on forever.
[Soundbyte on tape by John Horner, FX Strategist, Deutsche Bank] I think for the moment the Fed has been very successful in breaking that connection that investors previously had in their mind between tapering and tightening, so yes, the data that we've seen over the past few weeks does significantly increase the chances that the Fed starts tapering their bond purchases as soon as the December FOMC meeting.
[Soundbyte on tape by Michael Spencer, Chief Economist, Asia Pacific & Co-Head, Global Economics Deutsche Bank] I think if you go back to May and June, we were pricing in tapering against a backdrop of very weak US data and I think investors were very confused with that mix. Now, what we're seeing is a much clearer outlook. Over the next 3-4 months, we would say maybe 1-2, the Fed is going to start to withdraw this extraordinarily easy monetary policy. They're going to start tapering precisely because the data has been strong enough to allow that. That was the message we had six months ago, but it was not a message that many investors were really taking on board. Now as you say, we've got good strong economic data, the US economy is growing faster than 3%, the job market is stronger than the Fed thought it was a couple of months ago. It's strong enough to taper precisely because we're getting growth.
[Soundbyte on tape by Simon Warner, Head of Macro Markets, AMP Capital] We really don't know the extent to which the pre-crisis GDP trends are sustainable, and we really don't know what structural potential growth is going forward. There's lots of reasons to think that it's way, way lower than the period we got used to from 1980-2005. Part of the reason is that women's participation is now at saturation point, and secondly, the baby boomers are beginning to retire, so labour force participation should naturally be falling off anyway. So instead of the 2-2.5% per capita GDP that we've been used to, there's every reason to think that it's closer to 1.7%.
Meantime, gold is trading in a tight range ahead of the Fed meeting this week. Still showing signs of resilience after a bullish jobs report. But could prices fall in the coming months? Here's what one analyst had to say:
[Soundbyte on tape by Gaurav Sodhi, Resources Analyst, Intelligent Investor] There's an expectation now that gold is just going to continue to fall and fall, and anything that runs counter to that expectation appears to be good news. The sentiment around gold is as bearish as I've seen it for years. We shouldn't mince our words here - gold has been very heavily sold down and is very unpopular amongst investors.
Li Sixuan, from CNBC's Singapore headquarters.
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