- Positive US and Asian sessions feed through to Europe ahead of the open;
- US consumer confidence at seven year high as we enter the holiday season;
- Investors increasingly dovish ahead of the latest policy decision from the Fed;
- Low level data and more earnings on offer during the European session today.
A positive end to the trading sessions in the US and Asia overnight looks to be feeding through to Europe ahead of the open on Wednesday, where the FTSE 100 is expected to open 24 points higher, the CAC 40 6 points higher and the DAX 28 points higher.
Most of this appears to be stemming from the US, where consumer confidence is at a seven year high according to the latest survey carried out by the conference board. At a time when people are desperate to question to strength of the global economy, it's very encouraging to see the US going from strength to strength.
And what better time for consumer confidence to be at a seven year high than in the run up to the holiday season. It's clearly still early doors yet but this could be a very good quarter for the US.
Ahead of the latest monetary policy decision from the Federal Reserve this evening, we're also seeing evidence that people are anticipating a more dovish Fed in response to the slowdown in the eurozone and the disinflation that has been gripping many of the major economies. A survey compiled by CNBC showed that market participants are already scaling back their rate hike expectations to July, from June previously.
There's also been a lot of suggestions that it could be put back further to the end of next year, while some have even speculated about the potential for QE4 even with QE3 only expected to come to an end this month.
These expectations are far more dovish than what we had a couple of months ago before that sell-off in the markets knocked everyone's confidence. If they're correct though, this is positive for the markets and could help them push beyond the current highs if confirmed by the Fed.
With no press conference following today's decision, only the usual statement, I don't expect any significant shift such as that although I wouldn't write it off at the next meeting in December. Fed Chairwoman Janet Yellen is particularly dovish and I'm sure she'd welcome delaying the first rate hike, with wage growth still non-existent and productivity still an issue.
Back in Europe, there's not a huge amount for the markets to focus on today. There is some UK data being released that centre's around credit availability to households which may be of interest but is unlikely to have much of an impact on the markets.
The same applies to the latest French consumer confidence reading and retail sales figures for Spain. While both are obviously of interest, market reaction to them tends to be non-existent.
This leaves us to focus on corporate earnings season, which has got off to a wobbly start this morning as Deutsche Bank (XETRA:DBKGn) posted a surprise net loss. There is still a large number of companies left to report in both Europe and the US before we get the latest announcement from the Fed today and with so little on offer on the economic calendar, this is likely to be a key driver of the markets.
That said, people have built up the Fed to be so dovish at this stage, I would be surprised to see a little more caution creep in as we approach the decision, with the Fed now having a lot to live up to. Should we see no change in stance and just the end of QE, the markets may actually be a little disappointed.
DISCLAIMER: Any views or opinions presented are solely those of the author and do not necessarily represent those of Alpari (UK) Limited, unless otherwise specifically stated. This content does not constitute investment advice.