Europe Points Higher After Fed's Historic Shift
Fiona Cincotta August 28, 2020 7:40 AM
As the dust settles on the Federal Reserve’s historic policy shift the mood in the market is upbeat. European bourses and US futures are pointing to a stronger start.
Europe Points Higher After Fed’s Historic Shift
As the dust settles on the Federal Reserve’s historic policy shift the mood in the market is upbeat. European bourses and US futures are pointing to a stronger start after a mixed finish on Wall Street overnight. Whilst the Dow & the S&P ended in positive territory, the Nasdaq closed in the red.
Asia also saw a mixed show, with the Japanese Nikkei and the yen slumping on news that Shinzo Abe will resign on health reasons.
Jerome Powell, Chair of the world’s most powerful central bank announced a shift in policy framework, paving the way for years of more pro-growth policies.
The Fed will adopt a softer approach to inflation, allowing inflation to over run the 2% target for some time in order to boost employment and to compensate for the extended periods of time that it has run below target.
His comments weren’t unexpected. However, they still managed to create a stir in the financial markets sending the S&P to yet another all time high and dragging the US Dollar to a 27 month low versus a basket of currencies.
Today it is the turn of Bank of England Governor Andrew Bailey to take to the virtual stage at Jackson Hole. Investors will be looking for further clarity around negative interest rates. Earlier this month Andrew Bailey said that negative rates were in the BoE’s toolbox. However, he also said there are no plans yet to use them.
The question is whether the BoE sticks to its preferred avenue and just adds additional stimulus to bridge the fallout from the withdrawal of the Government’s job retention scheme, whilst keeping interest rates at or above 0. Or whether this will be when the central bank looks towards using negative rates?
German consumer confidence unexpectedly fell -1.8 in September against expectations of +1.2. Recent data from Germany has been broadly upbeat and pointing to Germany being on the road to economic recovery. Furthermore, the German government has extended the German job retention scheme beyond March 21 in a supportive mood. Still that fact that morale has fallen as coronavirus cases rise highlight concerns surrounding a second wave.
The Dax is looking to open higher, although trailing the FTSE, whilst the Euro is benefiting from the weaker USD.
Eurozone consumer confidence is keenly awaited.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.