The beat which matters for the market was that the US Federal Reserve Department acknowledged that the picture for the US economy is becoming less glooming. This pushed the US markets higher yesterday when the statement was released, but the follow up failed as they Fed has not backtracked from their rate hike path yet. It must be offbeat to comprehend that the Fed was going to make that U turn last night, but if you read between the lines, all clues are there, but perhaps for this rally to continue, the equity market needs more audible signal.
European markets are going to remain under the influence of the FOMC statement. As we have indicated earlier, the element which triumph the Fed decree of incrementing the interest rate in the first place was primarily on the basis of the labour market and therefore, the FOMC statement to navigate from its path, we need to see a substantial change in the labour data. Therefore, the upcoming US NFP data next week has even more importance and it certainly has the ability to shake the Fed’s statement.
However, you have to be careful here for what you are wishing for, because if you want the Fed to halt the tightening cycle, the economic picture needs to deteriorate. If that does take place, there is a strong possibility that pessimism triumph the sentiment and traders indulge even more risk off trades. Therefore, the U turn for the Fed policy is not even going to spur the rally that facilely as there will be plenty of alibi to not to crave for riskier assets.
Once again, the Interest for the precious metal remain mammoth as traders continue to build their position. If the Fed remains dovish, it will craft an optimistic sculpture for gold and if the Fed does a U turn on their policy, the uptrend will pick even more steam. Therefore, the strong bias remains skewed towards the upside.
Crude oil trading lower once again after having a brief moment of respite on the back of the news that constructive dialogues could be shaping up amid OPEC and non OPEC players and this news itself was stout enough to offset the crude inventory data which confirmed that the oil market is still swimming in the supply glut. The only factor which can change the fundamentals are the laws of supply and demand. And the only element which can change overnight is ostensibly the supply side and if we do get something more than these constructive dialogues, it can curb the rout in the oil price.
As for stocks, Facebook (O:FB) has proven one affair which is, if you are a kind of the ring, you want to do it in a signature style. The firm has thwarted Wall Street’s expectations and produced a stellar number. The management performance is pleasing and commendable, especially in the face of this slowing economic growth environment. Facebook has proven that it has the control of the transition from desktop to mobile version and they are taking advantage of this arena. Their user base is growing and they have thrashed the rumours that youngsters are not using their platform or leaving them. Facebook evidently knows that sitting on tons of cash is not the key to their success, but pilling cash in their R&D is more significant. Acquiring other firms and spending money on their new projects have been one of the key elements for them.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam