UK and Europe
In a slow start to the shortened trading week European markets drifted above and below the flatline amid lower trading volume after Easter and before a speech from Fed Chair Janet Yellen.
The rally in global equities stalled last week when a number of Fed speakers hinted at a rate rise at April’s FOMC meeting. Fed Chair Janet Yellen’s speech in New York today will be of added significance after the hawkish shift in the tone of Fed members was followed by data showing weakening US inflation.
A short-term top in oil markets is taking its toll on equities but the oil price has held up relatively well given the jump in the US dollar. Should Ms Yellen kill April as a live meeting, any drop in the dollar could support oil prices and in turn help equities.
Banking shares were volatile on the FTSE 100, giving up initial gains off the back of positive broker notes after the Bank of England’s Financial Policy Committee decided to force some banks to raise the countercyclical credit buffer. There had been a sense that given the pressure the banks have come under this quarter, the BOE would go easy on them. That quickly unravelled when the financial stability report was published.
Housebuilders were top risers after regulators restricted intervention in the housing market to buy-to-let mortgages. The new plans from the Prudential (LON:PRU) Regulatory Authority are designed to dampen the lending which has grown to levels not far off the peaks reached in 2007. The FPC said it remains “alert to potential threats to financial stability from rapid growth in buy-to-let mortgage lending.”
A pullback in oil and metals prices weighed on resource stocks.
US
US markets were flat to slightly lower after a surprise uptick in consumer confidence data failed to offset caution ahead of a speech from Fed Chair Yellen ahead of unemployment data at the end of the week.
Shares of Apple (NASDAQ:AAPL) gained over 1% after the FBI revealed it had successfully hacked the iPhone of one of the San Bernardino gunmen. The dismissal of the court case is a hollow victory for Apple given that its prize product has been shown to be vulnerable.
FX
It was a very quiet day in FX markets with barely any movement amongst major currency pairs after the Easter break and before a potentially game-changing speech from Fed Chair Janet Yellen.
US consumer confidence rose to 96.2 in March, beating expectations of a repeat of last month’s figure of 94.0.
The Norwegian krone was the biggest faller alongside the price of oil whereas the kiwi dollar saw some strength after rebounding from beneath 0.67 against the dollar.
Commodities
Crude oil prices slumped close to 3% as Saudi Arabia agreed to reopen a joint oil field with Kuwait ahead of expectations of another build in Tuesday’s API inventories data.
The price of gold rose for a second day after a seven-day slump saw the precious metal shed $60 to a low of under $1210 per oz. Even though equities remain around multi-month highs, gold above $1200 per oz suggests there isn’t much faith the rally will last.
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