Yesterday’s Federal Reserve meeting showed that the regulator is ready to take action on monetary policy. There is no talk of raising the interest rate yet, but the Fed wants to cut the quantitative easing (QE) program in the next 3 quarters.
The US market’s reaction to the FOMC minutes was mixed. Stocks were declining before the release, but jumped after the news before the close of the trading day. The Dow Jones Industrial Average decreased by 0.48%, the S&P 500 lost 0.29%, and the Nasdaq Composite decreased by 0.03%. As a result, the day closed in the negative zone, but the investor sentiment remained optimistic, as the progress of the US economy is still the main goal for the politicians, and the inflation should weaken by the end of the year. It should be noted that according to Bloomberg, many hedge funds are increasing their positions against technology companies.
Considering the signals of a possible cut in stimulus measures, European stock indexes declined much more than American ones on Wednesday. British FTSE decreased by 1.2%, German DAX lost 1.8% and French CAC 40 decreased by 1.4%. Yesterday, Bank of England Governor Andrew Bailey said that the British Central Bank would not allow inflation to stay above the target level of 2% for a long time. Investors expect financial and economic conditions in Europe to improve, but it is clear that the growing debt obligation of the EU countries will require more time for economic recovery.
The oil price fell sharply during the US session yesterday. The main reason for the decline is a problem with oil demand in Asian countries, especially in India, which is the 3rd oil importer in the world. There was also information that Iran has made considerable progress in the negotiations with the UN concerning its nuclear activities, and this may lead to the lifting of sanctions from Iran, which in turn is associated with a possible increase in Iranian oil exports this year.
Gold prices are closely tied to the US Treasury bond yields. Yesterday’s announcement by the Fed Reserve about its plans to reduce the pace of bond purchases led to a sharp decline in gold prices. But the momentum is still upward.
Australia released employment data for April. The change was down to 36,000 jobs, and the unemployment rate fell to a year low of 5.5%. The ASX 200 Index was up by 0.88% yesterday.
Main market quotes:
- S&P 500 (F) 4,115.68 -12.15 (-0.29%)
- Dow Jones 33,896.04 -164.62 (-0.48%)
- DAX 15,113.56 -273.02 (-1.77%)
- FTSE 100 6,950.20 -84.04 (-1.19%)
- USD Index 90.18 +0.43 (+0.48%)
Important events:
- Australia Employment Change (m/m) at 04:30 (GMT+3);
- Australia Unemployment Rate (m/m) at 04:30 (GMT+3);
- New Zealand Annual Budget Release (y/y) at 05:00 (GMT+3);
- ECB President Lagarde Speaks at 15:00 (GMT+3);
- US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
- Natural Gas Storage (w/w) at 17:30 (GMT+3);
- Canada BOC Governor Tiff Macklem Speaks at 18:00 (GMT+3).
