Comment: Chinese Indices Fall, All Eyes on the FOMC
June 17, 2014 7:52 am
European stock markets are staging a mild rebound following recent weakness on the back of the Iraq conflict. Traders are using the recent selloff as an excuse to snap up stocks at lower prices, but worries about the geopolitical tensions continue to weigh on market sentiment. Oil prices have dropped slightly today but are still at risk of further spikes on the uncertainty around the situation in Iraq.
For now traders are focussing on the big risk-event for markets this week; the Federal Reserve’s policy meeting, which kicks off today and concludes tomorrow. The Fed is set to downsize the bond buying programme for a fifth straight month to $35billion – what the market is really looking for are hints and messages from the FOMC regarding upcoming monetary policy and the scope for rate rises next year. The Fed may still keep a dovish stance after the International Monetary Fund yesterday cut its economic growth forecast for the US in 2014, predicting growth of 2% down from an April estimate of 2.8%. The IMF reckons the labour market in the US will not fully recover until 2017, due to the low level of inflation – the Fed itself reckons it will be some time before the jobs market is in a firm growth zone, increasing the likelihood that the bank will maintain its dovish tone.
US markets rose on Monday despite the geopolitical tensions, but in Asia overnight equity markets fell, with China underperforming against peers after data showed foreign direct investment in the Chinese economy unexpectedly declined. The Shanghai Composite Index dropped 0.9% while Hong Kong’s Hang Seng Index fell 0.5%. However, in Japan the Nikkei225 rebounded following the release of blueprints by Prime Minister Abe for his third arrow reforms package –as such, the Yen declined. Other FX pairs are generally stable, while gold prices are trading a little lower following recent strength on seeing investors’ park positions in the metal due to its safe-haven characteristics.
Looking ahead we have inflation and producer prices data out of the UK, which will be in focus ahead of tomorrow’s Bank of England meeting minutes. However, it’s the Fed and its decision on monetary policies tomorrow that everyone’s looking out for.
European stock markets are staging a mild rebound following recent weakness on the back of the Iraq conflict. Traders are using the recent selloff as an excuse to snap up stocks at lower prices, but worries about the geopolitical tensions continue to weigh on market sentiment. Oil prices have dropped slightly today but are still at risk of further spikes on the uncertainty around the situation in Iraq.
For now traders are focussing on the big risk-event for markets this week; the Federal Reserve’s policy meeting, which kicks off today and concludes tomorrow. The Fed is set to downsize the bond buying programme for a fifth straight month to $35billion – what the market is really looking for are hints and messages from the FOMC regarding upcoming monetary policy and the scope for rate rises next year. The Fed may still keep a dovish stance after the International Monetary Fund yesterday cut its economic growth forecast for the US in 2014, predicting growth of 2% down from an April estimate of 2.8%. The IMF reckons the labour market in the US will not fully recover until 2017, due to the low level of inflation – the Fed itself reckons it will be some time before the jobs market is in a firm growth zone, increasing the likelihood that the bank will maintain its dovish tone.
US markets rose on Monday despite the geopolitical tensions, but in Asia overnight equity markets fell, with China underperforming against peers after data showed foreign direct investment in the Chinese economy unexpectedly declined. The Shanghai Composite Index dropped 0.9% while Hong Kong’s Hang Seng Index fell 0.5%. However, in Japan the Nikkei225 rebounded following the release of blueprints by Prime Minister Abe for his third arrow reforms package –as such, the Yen declined. Other FX pairs are generally stable, while gold prices are trading a little lower following recent strength on seeing investors’ park positions in the metal due to its safe-haven characteristics.
Looking ahead we have inflation and producer prices data out of the UK, which will be in focus ahead of tomorrow’s Bank of England meeting minutes. However, it’s the Fed and its decision on monetary policies tomorrow that everyone’s looking out for.
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