Europe
Europe is a bit of a mixed bag today as the FTSE 100 is flat while the DAX and CAC 40 are higher on the session. The British market is lagging its Continental equivalents as the latter managed to hold onto their gains and build on them. The bullish sentiment that sprung up on the back of the Federal Reserve’s announcement last night has triggered a broad spate of buying in Europe.
The FTSE 100 had an upbeat start to today but it backed away from the 7300 mark. The price region was a significant support level throughout the summer, and if the level can’t be reclaimed, the bearish sentiment may persist.
Randgold Resources (LON:RRS) and Fresnillo (LON:FRES) are some of the biggest fallers on the London market as the underlying gold and silver markets are lower due to the Federal Reserve update last night. The US central bank was more hawkish than expected, and this prompted a drop in silver and gold – markets which already in decline for nearly two weeks.
Johnson Matthey (LON:JMAT) shares are up 13.4% today after the company initially stated they are on track to achieve their full-year target, and the positive run was helped by the announcement that they will invest £200 million in their battery business. The stock hit a ten month high today, and the bullish move could clear the way to 3568p – the 2016 high.
US
The Dow Jones and S&P 500 are a little softer today in the wake of the upbeat update from the Federal Reserve last night.
The US indices sold-off heavily immediately after the announcement, and then quickly bounced back. Today, we are seeing a bit of profit taking from the terrific run American stocks have been having through lately. Dealers are bracing themselves for the possibility of an interest rate rise in December, and it is common to see investors taking cash off the table after a run of record highs.
The Philly Fed manufacturing report for this month came in at 23.8, and the consensus was for 17.2, and the previous report was 18.9. US jobless claims dropped from last week’s 284,000 to 259,000, and traders were expecting a reading of 300,000.
The better than expected economic data adds to the argument that the Federal Reserve will hike rates in December. It is also encouraging to see the US’s economic health improving.
FX
The EUR/USD has bounced back today after the severe sell-off last night on account of the Fed being more hawkish than dealers were anticipating. Going into the meeting, traders were almost evenly divided over whether the US central bank will hike in December or not, and the Fed are certainly leaving the option on the table.
The GBP/USD is also making up for lost ground in the wake of last night’s US dollar surge. The prospect of a rate hike from the Fed at the end of this year dented the pound yesterday, but today we are seeing a rebound in sterling. The solid upward trend the pound has been in throughout the year is still in place, so we may see some fresh buying.
Commodities
Gold is under pressure today as the Fed were more hawkish than anticipated last night. The US central bank left the door open for another rate hike this year, and in turn we have seen a fall in gold on the back of it. The stronger than expected Philly Fed manufacturing number and jobless claims reports today also kept gold under the cosh.
Brent Crude and WTI are both down today due to profit taking. Both energy contracts hit multi-month highs yesterday and now we are seeing a small retreat. US oil refineries are not back to full capacity because of the two hurricanes, therefore demand for WTI is still lagging behind that of Brent Crude. The difference in demand for the two oil contracts is keeping the price differential between them.
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