European markets have traded higher this morning, after Janet Yellen said it would be “unwise” to wait too long to raise interest rates. Despite uncertainty on the path around fiscal policy, the Fed’s positive economic message has instilled optimism in investors, causing US stocks to close at new record highs, finishing higher for the fifth day in a row.
Banks are leading the gainers, following Yellen’s refusal to rule out the prospect of an interest rate hike in March, with Standard Chartered (LON:STAN) PLC leading the FTSE100 and Royal Bank of Scotland (LON:RBS) and Barclays (LON:BARC) following closely behind..
Reckitt Benckiser is not having such a great time this morning, with some of the enthusiasm for the Mead Johnson deal starting to ebb away a little. After sealing the deal on Friday to buy Mead Johnson, the shares have slipped back on uncertainty over the group’s targeted savings as well as the growth aspirations for the business.
It is a busy day for data, with the latest UK ILO unemployment rate coming in unchanged at 4.8%. What was particularly notable was a sharp decline in monthly jobless claims in both December and January while the one month unemployment number fell back to 4.6%, and closer to the Bank of England’s new equilibrium rate of 4.5%.
An unexpected decline in wage growth to 2.6% from 2.7% has undermined the pound a touch supporting the Bank of England’s belief that wage growth could well remain soft until any additional slack is used up in the labour market.
Month on month data for the US Consumer Price Index (CPI) are expected out at 13.30GMT. Last month’s CPI saw the largest year-on-year increase in two and a half years at 2.1%, reinforcing the narrative that inflationary pressures are increasing. Further upward momentum in consumer prices, which might be supported today’s data release, may increase market expectations about the probability of a potential March rate hike.
In addition, PepsiCo (NYSE:PEP), Inc. is expected to announce Q4 fiscal 2016 results before the opening bell. In the past four quarters, earnings have tended to beat expectations. Today’s numbers are expected to show EPS of $1.16c a share on revenues of $19.51bn. Markets will be particularly focussed on its Latin American business which has been a drag in previous quarters.
The Dow Jones is expected to open up by 33 points at 20537
The S&P is expected to open up by 1 point at 2338.5
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