NEWS AND ANALYSIS

Incisive market commentary and expert opinion

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
 
+ Show blog menu

Categories

Menu

Expand 2017 <span class='blogcount'>(231)</span>2017 (231)
Collapse 2016 <span class='blogcount'>(483)</span>2016 (483)
Expand December <span class='blogcount'>(23)</span>December (23)
Expand November <span class='blogcount'>(41)</span>November (41)
Expand October <span class='blogcount'>(37)</span>October (37)
Expand September <span class='blogcount'>(41)</span>September (41)
Expand August <span class='blogcount'>(52)</span>August (52)
Expand July <span class='blogcount'>(38)</span>July (38)
Expand June <span class='blogcount'>(42)</span>June (42)
Expand May <span class='blogcount'>(42)</span>May (42)
Expand April <span class='blogcount'>(45)</span>April (45)
Collapse March <span class='blogcount'>(41)</span>March (41)
AM Bulletin: Equities and oil slip in early trade
31 Mar 2016
PM Bulletin: Non-Farm Payroll look-ahead
31 Mar 2016
AM Bulletin: Yellen comments boost risk appetite
30 Mar 2016
PM Bulletin: Is a dovish Janet really that bullish?
30 Mar 2016
AM Bulletin: Yellen to speak
29 Mar 2016
PM Bulletin: US indices running into resistance
29 Mar 2016
AM Bulletin: Profit-taking ahead of holiday weekend
24 Mar 2016
PM Bulletin: Dollar correlations
24 Mar 2016
AM Bulletin: Equities head higher
23 Mar 2016
PM Bulletin: Melt-down in precious metals
23 Mar 2016
AM Bulletin: Markets looking for guidance
22 Mar 2016
Weekly Bulletin: US dollar on the back foot
21 Mar 2016
AM Bulletin: USD sell-off boosts oil
18 Mar 2016
PM Bulletin: A look at the S&P500 and FTSE100
18 Mar 2016
AM Bulletin: USD down on dovish Fed
17 Mar 2016
PM Bulletin: USDJPY
17 Mar 2016
AM Bulletin: All ears and eyes on FOMC
16 Mar 2016
PM Bulletin: Reaction to the “Sugar Tax”
16 Mar 2016
AM Bulletin: BOJ unchanged
15 Mar 2016
PM Bulletin: FOMC look-ahead and the USD
15 Mar 2016
Weekly Bulletin: Central banks still in focus
14 Mar 2016
PM Bulletin: Gold
14 Mar 2016
AM Bulletin: Confusion reins
11 Mar 2016
PM Bulletin: EURUSD revisited
11 Mar 2016
AM Bulletin: ECB meeting in focus
10 Mar 2016
PM Bulletin: Mr Draghi fires his bazooka
10 Mar 2016
AM Bulletin: Markets consolidate
09 Mar 2016
PM Bulletin: ECB look-ahead
09 Mar 2016
AM Bulletin: Chinese data weighs on equities
08 Mar 2016
PM Bulletin: Nasdaq 100
08 Mar 2016
Weekly Bulletin: ECB expected to boost stimulus
07 Mar 2016
PM Bulletin: FTSE making steady gains
07 Mar 2016
March: Non Farm Payrolls Out Today
04 Mar 2016
AM Bulletin: Markets quiet ahead of Non-Farms
04 Mar 2016
PM Bulletin: Meanwhile, over in silver...
04 Mar 2016
AM Bulletin: Equities consolidate
03 Mar 2016
PM Bulletin: Non-Farm Payroll look-ahead
03 Mar 2016
AM Bulletin: Equities soar
02 Mar 2016
PM Bulletin: AUDUSD chart
02 Mar 2016
AM Bulletin: See-saw day ends in losses for US equities
01 Mar 2016
PM Bulletin: Glencore
01 Mar 2016
Expand February <span class='blogcount'>(42)</span>February (42)
Expand January <span class='blogcount'>(39)</span>January (39)
 
 
 

 

It had been a slow couple of days for the markets as investors crawled back to work after the Easter break. There had been little sense of direction and volumes were understandably light as Europe remained closed on Monday. Add in the fact that many market participants are still away for the school holiday period and you had all the ingredients for a dull week. However, this is just the kind of mix that can provide the background to sharp market moves, particularly as we approach the end of the first quarter.

Investors were already trying to make sense of the disparity between the US Federal Reserve’s FOMC meeting on 16th March and the speeches which followed from a clutch of regional Federal Reserve presidents. The Fed’s rate statement, summary of economic projections and Janet Yellen’s press conference were all notable for their dovishness. In particular, the Fed’s “Dot Plot” indicated quite clearly that members were considerably less hawkish than they had been in December when it came to predicting the pace of monetary tightening for the rest of the year. However, just last week various Fed members were falling over each other to suggest that the US economy was behaving well and that inflation and unemployment measures showed that the central bank could soon be in a position to raise rates again. In fact, the conditions were such that further tightening could take place after the 26th-27thApril meeting, rather than waiting for June as many observers predicted. These fresh insights led to a slight wobble in equity markets as well as a jump in the dollar.

But yesterday Fed Chair Janet Yellen put a complete dampener on such speculation. She went out of her way to emphasise how cautious the Fed should be in adjusting monetary policy “given the risks to the outlook.”  She noted that the outlook for US inflation had become ‘somewhat more uncertain’ since December and that recent economic data releases had been ‘somewhat mixed’. She also made specific mention of uncertainty over the oil price, the global economy and China in particular. But perhaps most importantly she said that the Fed had ‘considerable scope’ to ease monetary policy further if necessary.

Mrs Yellen’s comments led to a sharp sell-off in the US dollar. A weaker dollar should help lift US inflation, push oil prices up, take some pressure off emerging economies with large dollar-denominated debts and boost the sales and profitability of US multinationals. Equities have also shot higher with the Dow and S&P500 hitting their highest levels so far this year.

But just how positive will this reaffirmed Fed dovishness ultimately prove to be for risk assets and equities in particular? After all, as Goldman Sachs commented, the Federal Reserve is now "less confident it can normalize rates" and sees a "weaker global growth environment." Is this really the kind of environment which could see the world’s major stock indices take out their all-time nominal highs made less than a year ago? We’ll see soon enough, and no doubt the next corporate earnings season which begins in a few weeks will throw some light on the matter. In the meantime we have Friday’s Non-Farm Payrolls to consider.

Disclaimer:

Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


Add a comment Add comment            

 

 
© 2017 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.