Positive Outlook in FOMC Minutes Inspires Equity Market Rally

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Stock Market Trading

: 20 June 2014

European equities are set to open higher this morning after a very quiet Asian session.

At Wednesday's FOMC meeting, Fed Chair Janet Yellen said that 'accommodative monetary policy, rising stocks and property should lead to above trend economic growth'.

The Fed's dovish statement reassured investors that monetary policy will remain relaxed in Europe and the US for a while yet.

The boost to sentiment was highlighted by one of the single greatest rises in gold over the last 12 months.

Despite this, European indices did not see a lot of volatility throughout Thursday's session and so, with no significant news out today, equity traders may hold off and prepare to try again next week.

In contrast, the Dow Jones did manage to extend its gains yesterday, albeit at a slower pace, hitting 16,900 after an 11 point rise for the session.

Stock Market Trading

: 19 June 2014

European equities are set to open higher this morning after a bullish close in the US and a buoyant Asian session.

The positive outlook in the FOMC statement caused rallies in European and US indices alike and was more volatile than expected.

The Federal Open Market Committee continued pulling the plug on QE, reiterating that this would continue in measured steps as economic growth continues to bounce back.

At the same time, the Fed stood by their previous decision to keep interest rates at record low levels for a 'considerable time'.

Investors took joy from those reassurances and pushed the Dow Jones 90 points higher to 16,893.

With a relatively quiet end to the week on the economic calendar, the question is whether equity investors will hold onto their bullish positions over the upswing.

Stock Market Trading

: 18 June 2014

European equities look set to open flat for the second day running.

Indices have been quiet across the board, with little movement in the benchmarks throughout the Asian session.

We expect this trend to continue throughout the day leading up to the 7pm (UK Time) FOMC statement and interest rate decision.

Janet Yellen will also be speaking at 7.30pm and the Fed Chair will release new quarterly forecasts for inflation, economic growth, unemployment and the benchmark Federal funds rate.

This should cause a bit of movement towards the end of the US Session, with most predicting a reduction in monthly asset purchases by $10bn to $35bn.

Ahead of the FOMC monetary policy decision later today, the Dow Jones gained 28 points to 16,804 as investors remained in a confident mood regarding US economic growth.

While the housing data was weaker than expected on both building permits and housing starts, inflation was higher than estimates, fuelling speculation that an interest rate increase could happen sooner than previously thought.

Stock Market Trading

: 16 June 2014

European equities are set to open lower this morning after bearish trends in the Asian session overnight.

With the possibility of escalating violence in Iraq, US futures dropped and Asian stocks fell.

The sustained conflict could lead to a possible civil war or break-up of the country.

Traders will be trying to predict which stocks and sectors will be able to weather the continued troubles in Iraq, OPEC's second biggest crude oil producer, and so defensive shares may be on the agenda.

Aside from concerns in the Middle East, another key market event this week will be Wednesday's Federal Reserve interest rate decision and FOMC statement.

The rate is expected to remain unchanged and the scheduled Fed taper is forecast to continue, with another $10 billion reduction in monthly bond purchases.

The quarterly forecasts will also be released and we are expecting a cut in the growth forecast due to the adverse weather effects in the first quarter effects.

Having said that, we are only anticipating a minor revision, so we are not envisioning any fireworks.

The Dow Jones rallied by 20 points on Friday, closing at 16,771 and discarding the rising uncertainty surrounding the violence in Iraq.

US traders seemed to think that M&A activity had the potential to overshadow the loss in consumer confidence.

However, the futures markets have since seen a steady sell off, with the Dow already losing 50 points at the time of writing.

By Jonathan Sudaria, 20 June 2014

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