Equities
The underlying message from the Federal Reserve was received loud and clear across global markets; “We’re still not hiking interest rates so go ahead and take some risk.” The risk-taking sentiment was evident in a rise in equities and commodities and a drop in the US dollar.
The FTSE 100 rose above 6,900 to come just shy of its post-Brexit peak and 2016 high. Stocks in France and Germany joined in the fun with gains of over 2% for both the CAC and DAX indices.
Commodity-related stocks led the gains on the FTSE 100 after an overnight drop in the US dollar when the Fed decided to hold rates steady. The price of gold eclipsed the last seven trading days in a huge jump higher. The higher value of the commodity they mine saw gold miners including Fresnillo (LON:FRES), Randgold (LON:RRS) and Polymetal rise to the top of the benchmark UK stock index. Glencore (LON:GLEN) was the biggest blue chip riser, surpassing 200p for the first time in over a year.
Shares of Mitchells & Butlers (LON:MAB) rose after the pub and restaurant group updated with a report of rising sales over the summer thanks to sunny weather. Full-year sales however are still expected to fall, with the group blaming the European football championships for a decline in food sales.
Shares of Pearson (LON:PSON) fell after a downgrade from BNP Paribas (PA:BNPP).
Stocks in the US opened higher as concern of an imminent rate hike continued to fall by the wayside while data showed jobless claims fell to a two-month low.
Sentiment may have been helped by democratic presidential nominee and establishment favourite Hilary Clinton taking a five-point lead over Donald Trump in a new poll ahead of Monday’s first presidential debate.
Apple shares rebounded from declines yesterday after McLaren denied it was in talks with the tech giant. Speculation that Apple could use McLaren as a Launchpad for its electric car manufacturing had sent Apple shares (NASDAQ:AAPL) lower on Wednesday. Still the rule to never believe something until it has been officially denied might apply here.
FX
The US dollar fell across the board on Thursday, extending losses from Wednesday when the Federal Reserve sidestepped another opportunity to raise interest rates. Fed funds futures imply just over a 50% chance of a rate hike in December but there’s a lot of economic data that can change opinions before then.
The British pound extended its rise with a move above 1.31 to the dollar following the Fed decision as the OECD joined a long list of banks and institutions backtracking on doom-laden forecasts for the UK economy.
Commodities
The decline in gold in the weeks leading up to the Fed meeting came as investment funds dropped bullish positions at the fast pace since May according to CFTC data. Yesterday’s rise has the hallmark of gold short-sellers getting caught wrong-footed by the Fed. The strength in gold could be short-lived if US economic data improves enough to justify the 60% probability the market is assigning to one rise in US interest rates this year.
The big draw in weekly US oil inventories made sure the dollar was able to trade higher alongside the rest of the commodity market in the weak-dollar environment. Brent crude futures topped $47 per barrel to reach a seven-day high.
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