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Data Clears The Way For The Fed As Equities Recover

Published 15/12/2015, 19:30
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European markets are set to break the losing streak with a bang today as its green numbers across the board as risk appetite returns if only for the day. The major European equity markets have posted strong gains, boosted further by a strong open in the US. The markets were also helped by data out of the UK, Eurozone and US that did not disappoint and cleared the path for the Fed to act tomorrow evening.

Traders will be sitting on their hands throughout much of tomorrow’s session and won’t be too interested in taking a positional view ahead of the key announcement, and of course we all must be vigilant going into the number. The markets and especially the Fed have made a habit of disappointing the markets and of course there is always the possibility that we may be left wanting more. However in this situation the Fed disappointing could be catastrophic for the markets, so we must all be careful because anything less than a 25 basis point cut could well send the markets into meltdown.

Before the volumes drops completely off we have had some important data reads today as US inflation data came out better than expected despite Oil prices dropping over the last few weeks. The better than expected number is further confirmation that the Fed will raise interest rates at tomorrow’s meeting and not disappoint the markets. The inflation reading came in at 0.5% YoY and 0.0% MoM versus expectations of 0.4% YoY and 0.0% MoM. The move can be put down to a resurgence in the service sector as prices in medical care and housing have pushed higher. The November UK CPI inflation data came in bang in line with expectations, posting a figure of 0.1% . The numbers shows to the few that have been pushing that the UK is still not in a position where it can sustain a rate hike, and in my opinion there are no reasons to raise interest rates in the UK until well in to 2016.

On a stocks specific basis retailers were towards the top of the leader board as almost all stocks were in positive territory. Morrison (L:MRW) and J Sainsbury (L:SBRY) were up over 5% each after it lost its place in the FTSE100 a few weeks back. The company has jumped to the top of the leader board after saying they were yet again going to try out a new local store idea, just a matter of weeks after selling of their M Local shops. Shares in retailers generally did well as markets recovered. They were also helped by a string tick higher in the oil price to above $37.

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