Futures Up As Fed Meeting Starts, Utilities Lead In The EU, Asian Markets Remain MixedGlobal equities move higher as the FOMC meeting gets underway, the committee is expected to alter the statement but traders are cautioned not to expect too much.
The U.S. Futures Are Mildly Higher In Early Tuesday Trading
The U.S. futures are pointing to a higher open on Tuesday as the FOMC meeting gets underway. The tech-heavy NASDAQ Composite is in the lead with a gain of 0.90%. The broad-market S&P 500 and blue-chip Dow Jones Industrials are up 0.55% and 0.40% respectively.
The move is fueled by optimism the FOMC will lower rates later this year, traders hoping for a rate cut this week may be disappointed. The CME’s FedWatch Tool shows only a 20% chance of rate hike at the current meeting but the odds for a hike go up significantly by July. What the market should expect is an alteration of the policy statement that opens the door for future rate cuts should the data support it.
In other news, OPEC is talking up another production cut later this year. This move is an obvious response to falling oil prices despite the threat of Iranian-based market disruptions. Oil prices have begun to show signs of support but have been in a downtrend for the last two months. On the economic front, U.S. housing starts and building permits were a bit better than expected. Starts fell MoM and YoY but not as much as expected and there were positive revisions to the prior two months. The data is not strong but does show some resilience in the market. With interest rates expected to fall housing starts and sales should begin to pick up later this summer.
EU Markets Move Up Strongly Despite Geopolitical Concerns
The EU equities markets are up strongly in Tuesday trading despite geopolitical concerns. The French CAC is in the lead with a gain of 1.60% at midday with the DAX close behind. The UK FTSE is trailing with a gain of 1.0% but still up strongly. The move is driven by remarks made this morning by Mario Draghi. He says the ECB stands ready to stimulate the economy, words that sent the euro moving lower. His remarks sparked criticism from U.S. President Donald Trump. Trump says the EU has been keeping the currency low for many years to gain an unfair advantage over the U.S.
The Utilities Sector is in the lead, up more than 2.5% at midday. The move has the sector at a 2.5 year high. The sector is led by French utility EDF which is up 4.5%. In Brexit news, the six remaining candidates for leadership of the Conservative Party face a second round of voting. Boris Johnson is still in the lead despite failing to appear at last weekends televised debate.
Asia Mixed, Trade Tensions Still In Focus
Asian equity markets were mostly higher on Tuesday despite trade tensions. The Hong Kong Hang Seng led with a gain of 1.00% while most others posted much smaller advances. The Japanese Nikkei was the only to post a loss and that nearly -0.75%. Shares of Nikkei heavyweights Softbank, Fast Retailing, and Fanuc were also moving lower. Attention is on the G-20 meeting next week and the possibility Trump and Xi could resume negotiations.