Stock markets around the world have been trading sharply upward overnight. Yesterday's late rally continued through overseas sessions and back around to North America again. US index futures are up 0.4% with the Nasdaq looking to build on yesterday's breakout. The FTSE is up 1.1% while the Dax is up 2.0%.
Yesterday's Fed news left both hawks and doves with something to cheer about. For the hawks, the statement indicated conditions were aligning for a rate hike but not just yet. With Regional Fed Presidents Mester and Rosengren joining George, the stage appears to be set for a December rate increase unless there's some kind of negative surprise. A spectacularly low jobless claims report this morning confirms the US job market remains robust as it approaches full employment.
The doves, meanwhile, took encouragement from the dot plot fed funds projections suggesting members are considering only two rate hikes in 2017, indicating a shallow pace of future increases and confirming a lower neutral rate goal of 1.00-1.25%. Markets really took off after Fed Chair Yellen indicated in her press conference that the US economy has more room to run than thought without overheating.
So traders are responding to what looks like a Goldilocks scenario where the US economy is growing enough to support robust corporate earnings but not fast enough to force the Fed to put on the brakes more aggressively.
Crude oil remains in rally mode this morning with WTI and Brent both up about 1% and WTI back up above $45.00. Another steep drop in US inventories this week provides a fundamental tailwind for Texas Tea while speculation continues to swirl ahead of informal talks between OPEC countries and Russia at a big conference in Algeria this weekend. The latest rumours suggest Iran and Saudi Arabia, the countries at the centre of the market share battle potentially having a preperatory sit down ahead of the bigger meeting.
In currency trading today, JPY has been giving back recent gains with the country closed for the Equinox Day holiday. A less hawkish Fed longer term has USD drifting lower, taking the lid off gold, EUR and GBP. Oil sensitive currencies CAD and NOK are trading higher along with WTI and Brent today. NOK is positively soaring as Norges Bank held interest rates today with Governor Olsen indicating there were no discussions of another rate cut.
Improving global sentiment and higher oil prices could put a tailwind behind Canadian stocks today, particularly in the energy sector and also potentially in financials with overseas banks rallying.
There have been no major corporate announcements this morning.
US jobless claims 252K vs street 261K
US FOMC interest rate 0.50% no change as expected
US FOMC GDP forecast cut to 1.8% from 2 0%
US FOMC core PCE inflation forecast 1.7% unchanges
US FOMC unemployment rate forecast raised to 4.8% from 4.7%
US FOMC Fed Funds end 2016 mdpt cut to 0.6% from 0.9%
US FOMC Fed Fuinds end 2017 mdpt cut to 1.1% from 1.6%
NZ RBNZ interest rate 2.00% no change as expected
Norway interest rate 0.50% no change as expected
Upcoming significant economic announcements include:
10:00 am EDT US existing home sales street 5.45M
10:00 am EDT US leading index street 0.0% vs previous 0.4%
10:30 am EDT US natural gas street 54 BCF
11:00 am EDT US KC Fed street (3)
6:10 pm BST Bank of England Carney speaking
1:00 pm EDT FOMC Lockhart speaking
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