Stocks rebound on dovish Fed comments
01:00, 24 september 2014
· Av CMC Markets
The rebound that started in china yesterday has accelerated through today’s European and US trading. Duelling Fed speakers highlighted the battle going on at the moment between hawks and doves at central banks and in the marketplace.
Cleveland Fed President Mester once again indicated that she would like to see guidance move from being time based (considerable period from end of QE3 to first rate hike) to something that reflects economic conditions, widely seen as a more hawkish stance. On the other hand, Chicago Fed President Evans, a known dove indicated he thinks the Fed should be patient even if it means allowing inflation to rise above target for a while and that (like Chair Yellen) he thinks the bigger risk would be raising rates and then being forced to backtrack if the economy sputters.
What’s most important about these comments is that the Chicago and Cleveland regions alternate as voting FOMC members and that next year when the Fed is deciding on rate hikes it will be the more dovish Chicago holding the hammer. Stocks has been staging a trading bounce in the morning and the Fed comments enabled them to keep upward momentum going through to the US close. Neither President changed their stance and there weren’t really any surprises in their comments, so it’s unclear how sustainable this rebound may be.
Today has been mixed in forex trading. Resource dollars which have been really depressed lately bounced back led by AUD and NZD. JPY and GBP had started out strong as well but gave back their gains an finished lower to the USD. EUR and CHF led continental currencies lower while RUB popped for a 1% gain suggesting Ukraine fears may be starting to subside. Gold and silver continued to decline.
Commodities took advantage of a pausing USD to rebound, with corn, wheat, coffee and copper all posting significant gains on the day. Energy led the way higher though with WTI crude rallying on the back of a surprisingly big drop in US inventories and pulling natural gas along for the risk ahead of its storage report tomorrow.
In stock action today, technology stocks continued to bounce back with Alibaba regaining the $90.00 level. A lot of the other momentum names like Tesla, Weibo, JD.com, Netflix, Pandora, First Solar and more posted 1.0% - 2.5% gains.
Blackberry rallied briefly on the launch of its new Passport square smartphone with keyboard, the slipped back to finish the day down slightly. While traders may be somewhat optimistic about the new product, they are also cautious considering past failures. The shares may remain active through Friday’s earnings report.
Significant announcements released overnight include:
US new home sales 504K vs street 430K
US crude oil inventories (4.2 mmbbls) vs street 0.75 mmbbls
Germany IFO bus climate 104.7 vs street 105.8
Germany IFO current 110.5 vs street 110.2
Germany IFO expectations 99.3 vs street 101.2
Italy consumer confidence 102.0 vs street 101.0
Sweden consumer confidence 102 4 vs street 98.0
Sweden manufacturing conf 102.8 vs street 103.5
Norway unemployment rate 3.4% vs street 3.0%
Upcoming significant announcements include:
11:00 am AEST US Fed’s Potter speaking in Tokyo on monetary policy
8:30 am BST Sweden producer prices previous 1.4%
12:00 pm BST Turkey interest rate decision 8.25% no change expected
8:30 am EDT US jobless claims street 296K vs previous 280K
8:30 am EDT US durable goods orders street (18.0%) vs previous 22.6%
8:30 am EDT US durables ex transportation street 0.6% vs previous (0.8%)
9:45 am EDT US flash service PMI street 59.2
10:30 am EDT US natural gas street 95 BCF
1:20 pm EDT FOMC member Lockhart speaking