Market Report 13.09: Volatility came from FED.
On Friday the global financial market melted down -2%, but last night’s comments from permanent Fed policymaker Lael Brainard acted as a neat counterweight to recent hawkish rhetoric from San Francisco Fed John Williams and Boston Fed Eric Rosengren. She said that the economic progress continues in the U.S., but the Fed would be wise to continue keeping policy loosing.
The continuous debate surrounding the prospect of a US rate rise continues to dominate market sentiment as US policymakers continue to gear up the markets for a further rate rise later this year.
The chances of a Fed rate rise in September had diminished to the point of non-existence after Fed governor’s Brainerd’s cautious speech last night. It’s the sudden burst of volatility that has investors scratching their head over whether it’s a buying opportunity or a sign of more pain to come. It is certainly interesting to note that despite the recent hawkishness, markets are still only assigning a 22% probability of move for next week, though the prospect of a move in December has increased to 57%.
And today the stocks in the US look set for a lower open with Dow Jones pointing towards a triple digit loss. There is some profit-taking with the massive reversal on Monday looking unsustainable in the short-term. Similar projected losses were reversed before the open on Monday.
Meanwhile in commodities, the IEA had downgraded its full year forecast, saying that oil demand growth in 2016 will struggle to get above 1.3 million barrels per day and it expects supply to continue to outpace demand at least through the first half of next year. Global oil demand growth is slowing at a faster pace than initially predicted. And the reaction in the oil price is very negative with a down of -2.4% until this moment.
The pound edged lower against the U.S. dollar on Tuesday, after the release of disappointing inflation data from the U.K., although comments by a Federal Reserve official limited the greenback’s gains. The next level to reach as one support point is in 1.3237, in this prices we could see a correction to the end of the day.
Graphics by: www.etoro.com
As volatility has picked up in the last two days, traders are parsing the latest Fedspeak and other factors that could determine whether stocks hold their gains. On Monday the most important indices of Wall Street closed with a raised of +1.5%, but today is very probably a take profit until the point of support 2.137.
Graphics by: www.etoro.com
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