As expected the FOMC meeting last night did not bring any surprise for the investors, but a consistent message from the Fed that they are going to support the market for the foreseeable future. One thing was clear from the Fed minutes that it was an innocent mistake by Janet Yellen when she mentioned the phrase ” in a six months time” or more evidently only and only her own opinion and no reflection of the committee members.
The unanimous decision by the FOMC committee about the interest rate was enough to fuel up the rally in the stock market and the same momentum is filtering into the European markets. Traders have decided to pay more attention to this interest rate decision over anything and celebrating another bull market run today. Having said that, the fear of hike in interest was not the main reason that we had the worst sell off for the Nasdaq and for other equity markets recently, but it was the curse of valuations. Perhaps, markets have forgotten the real problem of poor valuations and finding it difficult to remember that there is not much value in the equity markets, or simply just being arrogant- a sign of a bull market. The ignorance does not only stop here today, because we are not even factoring in the weak and disappointing data released in China. The trade figure showed that the export fell by 6.6% and imports were devastated with the final reading of 11.3%, and thus prompting a response by the PBOC and clearly raising the flag up and high that more needs to be done.
The economic docket is full today in Europe, and we will kick off with French manufacturing and production data. The reading fell short of forecast of 0.2%. The actual number was 0.1%, which is a further evidence of the country’s fragile situation. This has increased the pressure on the new French Prime Minister Valls, who will perhaps need to give more clear, well thought out and structured plan which is going to tackle the unemployment, boost growth and cut taxes on business rather than just simply chanting the songs of politics. We also have the same data due for Italy and the forecast is for -0.2%. The most non event for the day could be the UK’s interest rate and asset purchase decision which is likely to stay the same. But make no mistake because it is only a matter of time before we see the bank hike up its interest rate and perhaps will become the first central bank in this region to do this since the crisis.
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