By IFCMarkets
US stocks retreated on Tuesday as the Federal Open Market Committee two-day meeting got under way. While the S&P 500 and the Dow Jones Industrial Average fell 0.3% and 0.7% respectively, the Nasdaq Composite inched higher 0.2% as Apple gained 1.7% on news that the company is planning to launch an online television service. Johnson & Johnson weighed most heavily on the S&P 500 with a 1.2 percent decline to $99.89. Today the Federal Reserve policy meeting will conclude and the Fed is expected to drop the pledge to be “patient” before raising interest rates. While some economists expect the Fed will hike the interest rates as early as June citing strong job creation and continued growth in US economy, others think the Fed will raise the interest rates later in the year pointing to low inflation which is far from the 2 percent inflation target. The ICE dollar index rose 0.1% to 99.67 on Tuesday. Today at 19:00 CET the Federal Open Market Committee Statement and Rate Decision will be released and at 19:30 CET Fed Chair Janet Yellen will hold a press conference.
European stocks fell on Tuesday as the ZEW indicator of German economic sentiment came in weaker than expected. The Stoxx Europe 600 on Tuesday fell 0.7%, retreating from a seven-and-half year high. German DAX 30 fell 1.5%. The ZEW economic sentiment index increased to 54.8 in March from 53.0 in February, missing analysts’ consensus forecast of more optimistic reading of 59.4. The ZEW think tank stated that although economic sentiment in Germany remains at a high level, the “limited progress” in resolving the conflict in Ukraine and Greece’s debt crisis is having “a dampening effect on sentiment. Euro inched higher against the dollar for the second consecutive day. No important economic data is expected today in euro zone. Today at 10:30 CET labor market report will be released in UK by the Office for National Statistics. The tentative outlook is positive for Pound with January Average Weekly Earnings forecast to rise while the February Jobless Claims and January Unemployment Rate are expected to fall.
After closing to record 15-year high on Tuesday Nikkei is trading flat today as investors adopted a cautious stance, unwilling to make bets before the Federal Reserve’s decision later today. Yen was largely unchanged against the dollar as it has been since March 9. It is worth noting that as the monetary stimulus program started by the Bank of Japan in October lifted Japanese equity markets the Japanese stocks are trading at a price-to-earnings ratios of 15 times compared to 19 times for the S&P 500.
Oil prices fell on Tuesday. WTI futures retreated for the sixth session in a row as traders expected that coming reports will show another weekly increase in crude-oil supplies. Today at 15:30 CET Crude Oil Inventories for the week ended March 13 will be released by the US Energy Information Administration. Oil inventories are expected to have risen by 4.4 million barrels.
Gold futures settled on Tuesday at their lowest level since early November on concerns that the Fed decision will signal readiness to raise interest rates as early as June, strengthening the dollar further and making the dollar-denominated safe haven asset more expensive and less appealing.
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