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European equities are set to take their cue from the US markets and open higher. After an initial spasm, US equities finished in the green as Yellen kept the “considerable time” phrase in the FOMC statement and European equities are set to adjust for this before hunkering down and seeing how the Scottish Independence vote pans out. However, despite the jubilant reaction from equities traders, currency, commodity and bond traders took the whole statement as hawkish and subsequently sold commodities, sold bonds and bought dollars. Cleary someone is fundamentally wrong in their analysis and I’m sure once the uncertainty of the Scottish vote is out the way, this anomaly will be ironed out. With the fate of the UK in the hands of 5 million Scots, not much action is expected from the markets today so it will be wholly acceptable for traders to sit back and watch the (financial) telly.
The Fed’s statement pointed out the economy is expanding at a decent pace amid low inflation and reiterated its commitment to hold interest rates near zero for a ‘considerable time’. It was added there’s room for recovery in the labour market and that asset purchasing is to be completed in October. The Dow briefly rose but retraced shortly after. Nonetheless it ended 35 points up at 17,176.
Although it was slightly higher than initially predicted, inflation in the euro zone was not far off the weakest levels in nearly 5 years. The shared currency dropped 97 pips against the greenback to 1.2865 as Mario Draghi continues to struggle in his effort of convincing investors that his stimulus does a good job in kick starting the economy.
Despite estimates for a drop of 1.5 million barrels in the US weekly crude inventories we had a 3.67 million barrels build, the first increase in 5 weeks as report by the EIA. The result was a steady slump in the WTI crude prices which ended 81 cents down at $92.83 a barrel.
It was not a good day for gold prices after the Federal Reserve raised its interest rates outlook sending the greenback higher. Non interest paying gold remained under pressure, yesterday loosing another $11.1 to $1223.1. Could Scotland vote attract some buying interest?
Marius is a Dealer at Capital Spreads. His involvement with CFDs and spread betting started in 2008 after graduating from London Metropolitan University with a MSc in Finance. He contributes to the Daily Comment by providing a snapshot of the FX, indices and commodity markets (oil and gold).
Jonathan is a dealer at Capital Spreads. Having started his career in the city trading interest rate and bond derivatives in 2005, he then entered the spread betting and CFD industry in 2007 by joining the dealing desk at City Credit Capital. After successfully managing multiple asset risk books across the European, US and Asian time zones throughout the height of the financial crisis, he then took that experience to Capital Spreads in 2010.
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