US markets look set to open higher today as markets reassess the chances of and come to terms with a possible Fed rate hike in April 2015. Futures suggest S&P500 will open 6 points higher at 1878 with the Dow Jones expected to open 47 points higher at 16,383. Investors appear to have taken Yellen’s surprise comments as a good chance to buy the dip in the equities uptrend. The excuse used yesterday was the positive readings from the Philly Fed and the Conference board surveys. Today Russia signed into law the annexation of Crimea. While the situation is tense and certainly has the potential to flare up again, markets have mostly moved on. The visa-bans issued by the EU and US look to be largely meaningless for capital markets and were reportedly laughed-off and even called a ‘badge of honour’ by the Russians involved. US bank stocks may be in focus again today as the latest round of Bank stress test results came in yesterday. 29 out of 30 banks passed but some of the top investment banks came very close to minimum capital requirements in the simulated crisis. Shareholders in Bank of America, Goldman Sachs, JP Morgan Chase and Morgan Stanley are now faced with the possibility of the Fed denying requests for dividend payouts and share buy-backs if to do so puts capital levels below requirements. The Whole bank stress test apparatus is clearly rigged to maintain confidence in banks while also giving them a gentle nudge into building up their balance sheets. While this should help in the next crisis, the problem is that banks have not been lending for 5 years because they are building up these cushions. This is largely why there is little to no inflation in the US despite massive central bank money printing because the bulk of money creation comes from banks when they make a loan. An interesting side-note for US tech investors was that the NSA’s general council on Wednesday stated that the US tech giants including Google, Facebook and Microsoft were fully aware of the agency’s snooping. This calls into question statements made by the CEO’s following the spying revelations and may affect user’s trust and usage of the company’s widespread services. Consumers, especially in the US are becoming more aware of privacy issues where Senator Rand Paul had a standing ovation over his speech on mass surveillance at the University of Berkley. Fed speakers will be of extra import today after the Fed Chair’s comments on Wednesday, Dallas Fed President Richard Fisher due to speak in London later this evening, followed soon after in Washington by dissenter Minneapolis Fed President Naryan Kocherlakota as well as Jeremy Stein, also both voting members of the FOMC. CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
US markets higher as just one bank fails Fed’s stress tests
20:00, 20 March 2014