European Markets And U.S. Futures Rally Overnight

Current Futures: Dow +163.00, S&P +20.00, NASDAQ +29.25
 
European Trade: European markets and U.S. futures rallied overnight, with the banking sector posting the biggest gains. The Asian markets closed in the green, but the gains were relatively small. The U.S. futures traded in the green most of time, and currently the S&P is higher by 2.5%. 

The market is anticipating two main events today, the FOMC meeting and the House of Representatives’ vote for the $815 billion rescue package. The plan is expected to pass the House relatively easy, because Democrats have a 255 to 178 seat majority. However, President Obama’s stimulus plan is expected to have a hard time in the Senate, some even suggesting the proposal might even stall.

The main reason for the divergence is the share between tax cuts and public spending in the stimulus package. Republicans favor larger tax cuts, saying it would help the manufacturing sector, by reaching it directly. Most economists favor the public spending program, which would increase the number of employees once the projects get started. Democrats pledge that $212 billion would be used as tax cuts, while the Republicans proposed a larger sum, $275 billion.

Also, later today, the FOMC statement is expected along with the Fed Funds Rate announcement. Today’s meeting will bring something new, being the first time when the Fed announces its target for the balance sheet. Having reached the limits of conventional monetary policy, the Fed has now shifted its attention to expanding its liabilities side. Just in the last year, the Fed’s balance sheet has more than doubled, reaching $2 trillion

In Europe, the U.K. Ftse rose 70.60 points (1.68%) to 4,265.01, while the German Dax added 105.31 points (2.44%) to 4,428.73

Crude oil moved lower again in the last sessions, on demand concerns. Crude oil for February delivery fell $0.50 to $41.50.

Gold bounced off the $900 resistance area. Bullion for immediate delivery fell $12.70 to $887.60.

Previous Asian trade: Tonight, the Nikkei rose 45.22 points (0.56%) to 8,106.29. The Australian S&P/Asx rose 51.50 points (1.5-%) to 3,495.50