Some projection improvements from the Federal Reserve continued optimism regarding US stimulus and hopes that a last-gasp Brexit deal can still materialise were all factors on Thursday morning.
Though the Fed left things unchanged policy-wise, its forecasts for this year and the next got a polish – it is now expecting the US economy to contract by 2.4% in 2020, before rebounding by 4.2% in 2021. The unemployment rate, meanwhile, is set to fall back to 5%, not too far off where it was at the start of the year.
As for fiscal stimulus, Congress is quickly running out of time to get the $908 billion bill passed before Friday evening’s shutdown. Confirmation of the relief package could be the thing the markets need to kick-start a Santa rally heading into Christmas week.
On the surface, the chances of a Brexit deal were dealt a blow after the announcement of a parliamentary recess from Thursday. However, some have speculated this is just part of the bluster of negotiations, and that MPs could well be recalled if an agreement does materialise in the next few days.
The pound certainly wasn’t put off – against the dollar it surged to a 2 and a half year high, rising 0.8% to hit $1.358 on a mixture of Brexit hopes and greenback weakness. The latter factor was evident in sterling’s meagre 0.1% increase against the euro, nevertheless a 2-week high for the British currency.
Sterling’s growth didn’t prevent the FTSE from once again flirting with 6,600, adding 0.4% as it came within a whisker of that key level.
The DAX continued to put the work it, swelling by another 140 points to a fresh 10-month peak of 13,700. A session or two more like that, and the German index will be back to the all-time highs seen just before the stock market crash of February and March.
The Dow Jones should be right there alongside the DAX; the futures have the index added 140 points of its own, lifting it past 30,300. Cling onto that level – something the Dow hasn’t been the best at recently – and the US index has itself a fresh record peak.
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