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Top 5 Things to Know in the Market on Thursday

Published 09/27/2018, 05:29 AM
© Reuters.  Top 5 things to know in the market on Thursday

Investing.com - Here are the top five things you need to know in financial markets on Thursday, September 27:

1. Markets Digest Fed Decision

Investors are digesting news that the Federal Reserve increased interest rates on Wednesday, as expected. The Fed raised interest rates by a quarter point to 2.25%, its third rate hike this year and its eighth since 2015.

In its statement, the central bank said it expected to increase rates for a fourth time in December, with three hikes in 2019 and one in 2020.

However the Fed dropped the word "accommodative" to describe its monetary policy stance from its statement, leading some investors to speculate that it could be moving towards ending monetary tightening.

Fed Chair Jerome Powell said at a press conference that the language change doesn’t mark a shift in policy. “Instead, it is a sign that policy is proceeding in line with our expectations,” he said.

Officials also raised median expectations for economic growth in 2018 this year to 3.1%, compared with 2.8% at their June meeting.

Meanwhile, investors priced in the chance of a fourth rate hike in December at 79.2%, up from 77.7% on Wednesday.

2. Global Stocks Volatile after Fed

World stocks were volatile as investors digested the Fed decision and looked ahead to a flurry of U.S. economic data.

U.S. futures pointed to a flat opening bell on Wall Street, with the S&P 500 futures edging up 0.02% while Dow futures ticked down 0.07% and tech heavy Nasdaq 100 futures increased 0.15%. All three indexes closed in the red on Wednesday.

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Trading in Europe was also lower, with Germany’s DAX and France’s CAC 40 in the red and London’s FTSE 100 flat.

Asian stocks gave up earlier gains. The Shanghai Composite was down 0.54% and the SZSE Component index slumped 1.02%. The China A50 Index of China’s biggest companies inched down 0.24%, while in Japan, the TOPIX fell 1.18% and the Nikkei 225 decreased 0.82%.

3. Dollar Boosted After Fed, Italy Budget Row Hits Euro

The dollar gained ground against a currency basket in the wake of the Fed decision, with the U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, up 0.31% to 94.16.

The euro fell to one week lows amid concerns that Italy’s new government would have to delay a budget meeting planned for later in the day, following reports of a row ahead of a looming deadline to present the budget.

Investors are also worried that the government will seek to increase next year’s budget deficit, which could put Italy on a collision course with the European Commission and investors who would like to see a deficit cut.

EUR/USD was last at 1.1718 after falling as low as 1.1685 earlier, the lowest level since Sept. 20.

4. Pending Home Sales, Durable Goods, on the Economic Calendar

A flurry of economic data is expected on Thursday, as investors look for clues about the strength of the economy and future Fed rate hikes.

Second-quarter final GDP numbers are released at 8:30 AM ET (12:30 GMT) but little is likely to change from the last report. Durable goods data is also released at the same time, as well as jobless claims numbers.

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Investors are likely to pay close attention to pending home sales numbers for August, which arrive at 10:00 AM ET (14:00 GMT). Housing looked a little shaky in July, but new home sales surprised to the upside for August.

Economists expect that pending home sales dipped 0.2% from last month, compared with a 0.7% drop in the prior reading.

5. Oil Prices Surge amid Fears over Looming Supply Crunch

Oil prices surged higher amid over a looming supply crunch with sanctions set to be re-imposed on major producer Iran on Nov. 4.

London traded Brent crude futures were up 0.8% to $81.44 a barrel from their last close, not far from the high of $82.55 reached Tuesday, the highest price since November 2014.

U.S. crude prices added on 0.95% to $72.27, re-approaching Tuesday’s highs of $72.75, the most since July 11.

The impending loss of supply from Iran has seen oil prices rally, and the Organization of the Petroleum Exporting Countries and non-OPEC members, including Russia, have little spare capacity to boost output in order to offset falling global supply.

While global markets are tightening increased domestic output means that U.S. supply remains plentiful.

In its weekly report on Wednesday the Energy Information Administration said U.S. crude production hit a record 11.1 million barrels per day last week.

Crude oil inventories recorded a build of 1.85 million barrels to 395.99 million barrels last week, the EIA data showed, compared to expectations for a drawdown of 1.27 million barrels.

Latest comments

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I don't quite follow the meaning. Thanks :-).
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