Fed Fallout, BoJ And BoE Preview

Fed Fallout, BoJ And BoE Preview

London Capital Group  | Sep 17, 2020 09:55

US stock markets tumbled after the Federal left rates on hold and upgraded its economic forecasts.

The Bank of England meeting today could be a primer for when the central bank adds more stimulus again at its November meeting.

MARKETS

The Dow Jones eased from highs on Wednesday, as investors weighed up a rout in technology and the Federal Reserve's pledge to keep rates lower for a prolonged period.

The S&P 500 was down 0.43% while the Nasdaq slipped 1.25%. Tech stocks took a breather following a strong start of the week, with Apple (NASDAQ:AAPL) falling 3% after it unveiled new iPads and Apple watches and a new bundled subscription service as well as a personal fitness service. The weakness in the Technology sector pressured the broader market to retreat from session highs offsetting the Fed's dovish policy announcement.

Energy surged 4% as U.S oil prices rallied after crude inventories fell by 4.4 million barrels last week, confounding expectations for a build of 1.27 million barrels. Energy stocks were among the biggest gainers of the day. Financials also climbed higher even as Treasury yields moved higher despite the Fed's low-interest rate pledge.

In Europe, the Euro Stoxx 50 was up 0.2%. In Asia, most equity markets declined this morning, running out of steam after 5 days of straight gains.

DAY AHEAD

It’s central bank double trouble – the Bank of Japan and Bank of England decide interest rates also UK catalogue retailer Next reports interim earnings.

The political context for the Bank of Japan made this meeting a little more interesting – New PM Yoshihide Suga has said he is a Abenomics-believer so the general thrust of the central bank’s QQE policy should remain the same. If the BOJ is to turn more dovish- if that’s even possible without the use of a helicopter full of money - it didn't happen at this meeting.

Japan appears to be coming out the other side of a new wave of virus infections and markets are relatively calm so there’s no need to cut rates or target a lower yield on government bonds. The BOJ upgraded its economic assessment but not to the extent that it was a big mover for the yen.

There is a growing consensus that the Bank of England will act again at its November meeting so if that’s the case, today will be a primer for markets. The end of the government furlough scheme in October coupled with the rising chance of everyone’s favourite cliff edge, a no deal Brexit– all point to action, most likely more QE come November.

If the last meeting is anything to go by, the BOE are in a bit of a muddle over negative rates. Their policy review concluded they would cause more harm than good but Governor Bailey followed it up by saying they are in the toolbox.

Original Post

London Capital Group

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Venkatesh Venki
Venkatesh Venki

sell  ... (Read More)

Sep 17, 2020 10:50 GMT· Reply
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