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FTSE Ignores Rising Inflation, Relatively Quiet Open Ahead Of Fed Meeting

By Spreadex (Connor Campbell)Stock MarketsJun 16, 2021 09:18
uk.investing.com/analysis/ftse-ignores-rising-inflation-relatively-quiet-open-ahead-of-fed-meeting-200481539
FTSE Ignores Rising Inflation, Relatively Quiet Open Ahead Of Fed Meeting
By Spreadex (Connor Campbell)   |  Jun 16, 2021 09:18
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It was a surprisingly calm open on Wednesday, suggesting the markets have set aside certain anxieties for the moment.

In the UK, headlines were dominated by another sharp jump in inflation. The standard CPI reading leapt from 1.5% to 2.1%, while the core figure surged from 1.3% to 2.0%. That will make for an interesting Bank of England meeting next Thursday, now that inflation is above the long-held 2.0% target.

And yet, the FTSE wasn’t fussed, instead adding 0.3% to sit 10 points shy of 7,200. This as the pound saw a perky start to the session itself, climbing 0.2% against dollar and euro alike.

These gains meant investors were also fine with a rough set of numbers out of China. Industrial production, fixed asset investment and retail sales all severely underperformed expectations, with the latter reading falling from 17.7% to 12.4% month-on-month.

Things were slower in the Eurozone, where the DAX, now sitting above 15,700 for the first time, dipped 0.1%. The CAC moved 0.1% in the other direction, but still couldn’t quite reach 6,650.

After adding to a string of negative sessions, the Dow Jones finds itself in a notable slump, especially when compared to Europe. And it’s unlikely to change that during Wednesday’s session, at least, as it waits for this evening’s crucial Federal Reserve meeting AND new set of economic projections.

Last week’s inflation data has potentially pushed the central bank closer to the precipice of a shift in monetary policy.

The standard reading for May came in at 0.6% month-on-month, while hitting 5.0% year-on-year – the highest level since 2008. The core figures were just as alarming, with a month-on-month reading of 0.7%, and a yearly reading of 3.8%, a level last seen in 1992.

Countering these eyebrow-raising CPI figures, however, is an underperforming labour market. Though the weekly jobless claims reading is now regularly hitting pandemic-lows, the headline nonfarm number has repeatedly failed to match estimates across the last few months. This is important, as one of the requirements for Jerome Powell to consider tapering the Fed’s current stimulus programme is a ‘string’ of strong jobs reports.

The inflation situation is likely going to outweigh the labour landscape and may prompt a shift in language on Wednesday evening. It all depends on whether the Fed is going to stick by its believe that this spike in inflation is transitory and is a tolerable by-product of the reopening economy.

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FTSE Ignores Rising Inflation, Relatively Quiet Open Ahead Of Fed Meeting
 

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FTSE Ignores Rising Inflation, Relatively Quiet Open Ahead Of Fed Meeting

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