Markets Rally In Wake Of Fed, Central Bankers Turn Dovish, Trade Hopes Rise In Asia

The global markets surge after the FOMC hints at rate cuts, is this the start of the next rally or the beginning of the end for 2019’s market recovery.
Thomas Hughes

The U.S. Futures Are Moderately Higher After The FOMC Meeting

The U.S. futures are pointing to a moderately higher open in early Thursday trading. The Dow Jones Industrials lag the market with a move of 0.85% while the S&P 500 and NASDAQ lead. The S&P 500 is up about 0.95%, the NASDAQ Composite about 1.30%, on what the market perceived as a more-dovish than expected policy statement from the FOMC. The FOMC hinted at possible rate cuts later this year and the first could be as early as July. The CMEs Fed Watch Tool is now indicating a 100% chance of rate cut at the next meeting.

The statement and Jerome Powell’s remarks during the press conference sent the yield on the ten-year Treasury below 2.0%. This is the lowest level for the mid-duration U.S. bond in three years. The dollar also saw some big moves in the wake of the FOMC meeting that trimmed more than 1.0% off the Dollar Index over the last 24 hours. The tech-sector saw the biggest gains following the policy release. Lower interest rates mean lower borrowing costs for businesses and that will fuel stock buybacks later this year. Shares of FAANG stocks are up more than 1.0%.

In economic news employment data remains firm although expansion within the manufacturing sector has slowed. Initial jobless claims came in at 216,000, 4,000 below expectations, and down from the previous week. The Philly Fed’s Manufacturing Business Outlook Survey came in at 0.3%. This is the lowest level since February and reflects a downshift in new orders and shipments. Employment levels remain strong near 15.5 but fell 3 points over the last month.

EU Markets Higher As Central Bankers Turn Dovish

Central bank activity has been hot over the past 24-hours. Not only did the FOMC meet but the BOE and BOJ met as well. Both the BOE and BOJ held rates unchanged, both the BOE and BOJ also cited mounting risks to domestic and global economies. This sentiment is in lockstep with the ECB’s new pledge to stimulate the economy and points to policy easing worldwide. The DAX shot up more than 1.0% intraday to set a 9-month high, it is trading up about 0.80% at midday. The French CAC and UK FTSE 100 are both up about 0.65%.

In Brexit news, the field of candidates to replace Theresa May is cut to two. Frontrunner Boris Johnson is said to retain a substantial lead over the number two candidate. In stock news, tech leads the market with an average gain near 1.8%, Travel & Leisure lags with a loss of -1.3%. Shares of Delivery Hero shot up 10% and to the top of the ranks after it upped full-year guidance.

Asian Markets High On Fed, Trade

Asian markets are broadly higher following the Fed’s dovish policy switch. The move is aided by renewed optimism for a trade deal that has the Shanghai Composite up 2.4% for Thursday’s session. The Hang Seng follows the closest, up 1.25%, while most other indices in the region closed with gains between 0.30% and 0.65%. The word out of Beijing is that talks will happen at the G-20, the talk out of Washington is that talks will start before the G-20. In both cases, officials are upbeat about the situation although traders are cautioned not to expect too much.

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