By IFCMarkets
Fed keeps rates unchanged but signals a hike by year end
US stocks rallied on Wednesday after Federal Reserve policy makers left the policy unchanged with Janet Yellen saying they judged the case for an increase has strengthened but decided for the time being to wait.
The dollar weakened: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, fell 0.5% to 95.477. The Dow Jones industrial average gained 0.9% to 18293.70 with shares of Boeing, Caterpillar and Chevron leading the blue chip index higher. The S&P 500 rallied 1.1% settling at 2163.12 led by energy stocks. The Nasdaq added 1% closing at a record high 5295.18. Fed’s decision to leave its target rate for overnight lending between banks in a range of 0.25 – 0.50 percent was widely expected. The median projection of interest rate forecasts released with the statement shows policymakers cut the number of rate increases they expect this year to one from two previously. However three FOMC members – Wednesday, Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren dissented on the policy statement in a 7-3 vote, saying they favored raising rates this week. At the same time the Federal Reserve strongly signaled it could still tighten monetary policy by the end of this year as the labor market improved further. The Federal Reserve also projected a less aggressive rise in interest rates next year and in 2018, and cut its longer-run interest rate forecast to 2.9% from 3.0%. Equities tend to rise with low interest rates that lower cost of debt for companies in lower rate environment which Jane Yellen described as a “new normal”. Today at 14:30 CET Initial Jobless Claims and Continuing Claims will be released in US. The tentative outlook is positive. At 15:00 CET July House Price Index, August Existing Home Sales and Conference Board Leading Indicators will be published, the outlook is positive. And at 16:30 CET Natural Gas Storage Change will be released by the Energy Information Administration.
Banking stocks lead European markets higher
European stocks rose on Wednesday lifted by bank stocks after the Bank of Japan announced it will now target 10-year interest rates aiming to keep them around zero percent until the 2% inflation target is overshot. The euro and Pound strengthened against the dollar ahead of Federal Reserve interest rate decision.
The Stoxx Europe 600 gained 0.4%. Spain’s Banco Popular Espanol rallied 9.1%, Italy’s UniCredit jumped 3.6%, Germany’s Commerzbank AG gained 3.3%. Germany’s DAX 30 index rose 0.4% to 10436.49, France’s CAC 40 gained 0.5% and UK’s FTSE 100 added 0.1% to 6834.77. Today at 10:00 CET European Central Bank publishes Economic Bulletin. At 16:00 CET preliminary Consumer Confidence for September will be released in euro-zone, tentative outlook is negative for euro.
Asian stocks get boost from central banks’ support
Asian stocks are rising today boosted by continued easy policies of Bank of Japan and Federal Reserve. Chinese stocks are advancing led by real estate stocks: Shanghai Composite Index is up 0.5% and Hong Kong’s Hang Seng Index is 0.4% higher. Australian stocks rose with S&P ASX 200 up 0.7% as Australian dollar added to overnight strength against the dollar. Japanese markets are closed today for the Autumnal Equinox Day. Nikkei ended 1.9% on Wednesday after the Bank of Japan kept its deposit rate at minus 0.1 percent amid prior speculation it might cut rates further into negative territory. The central bank also stated it will continue purchases of bonds until inflation exceeds, and not merely meets, its 2% inflation target. At the same time the regulator announced it starts targeting 10-year interest rates to keep them in positive territory around zero percent, steepening the yield curve. Today the Reserve Bank of New Zealand also left rates unchanged but renewed a pledge to cut again even as much of the domestic economy grows briskly.
Third weekly drop in US crude stocks lifts oil prices
Oil futures prices are extending gains today following the US Energy Information Administration report Wednesday crude oil stockpiles fell 6.2 million barrels last week to 504.6 million barrels. The weakening of the dollar after Federal Reserve kept the rates unchanged also supported oil. November Brent crude rose 2% to $46.83 a barrel on London’s ICE Futures exchange on Wednesday.
Market Analysis provided by IFCMarkets
Free Reports:
Get Our Free Metatrader 4 Indicators - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter
Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
Note:
This overview has an informative and tutorial character and is published for free. All the data, included in the overview, are received from public sources, recognized as more or less reliable. Moreover, there is no guarantee that the indicated information is full and precise. Overviews are not updated. The whole information in each overview, including opinion, indicators, charts and anything else, is provided only for familiarization purposes and is not financial advice or а recommendation. The whole text and its any part, as well as the charts cannot be considered as an offer to make a deal with any asset. IFC Markets and its employees under any circumstances are not liable for any action taken by someone else during or after reading the overview.
