Markets Rally on Cautious Fed – Nasdaq up 1%
US Stock markets moved higher again yesterday after Fed members remained cautious on next moves in the interest rate. The Nasdaq rallied nearly 1% as investors took a glass half full approach to Fed comments, the S&P gained 0.28% notching up its longest winning streak in 2 years and the Dow added 0.17%. The dollar gained ground against most of the majors, most notably against the Aussie which dropped 0.9% despite a rate hike from the RBA. Treasury yields dropped again after the Fed chat with the 10-year dropping to 4.57% and the 2-year to 1.92%. Gold dropped further to hit fresh multi week lows after peaking above $2,000/oz on 3 separate occasions and Oil dropped 4% further on demand fears.
Black Gold Diving
Oil prices have just hit levels not seen since July this year as fears on supply issues have fallen back and anticipated demand from China has reduced. Brent crude futures closed below $84, down 4.3% for the first time since the Middle East conflict started and WTI futures dropped 4.3%. Some of the move is undoubtedly war risk premium being taken off the books, but most investors are looking at the bigger picture and seeing a general downturn in growth prospects as higher interest rates across the globe start to kick into economies. Traders are now anticipating more volatility ahead as the threat of an escalation in the middle east remains strong and Saudi Arabia and Russie remain committed to end of year production cuts.
Central Bankers in Focus Again Today
It has been an interesting start to the trading week for investors as markets have adjusted to a big prior week and some correlations are breaking down. However, there are a few events on the calendar today that could give traders some direction and see some trends reasserting themselves. Traders in APAC will turn their attention to New Zealand early in the day as the RBNZ releases its quarterly Inflation Expectations data, but the main talking points will probably come later in the day when 2 central bank heavyweights speak. During the London session we are set to hear from Bank of England Governor Andrew Bailey when he speaks at the Bank of Ireland conference in Dublin and later in the day, we hear from Fed Chair Jerome Powell when he speaks in Washington DC. Traders are expecting to see volatility around both speeches but probably more so with Jerome Powell as markets are very sensitive to any updates from the Fed in the current conditions.
