Fed decision in focus


SP 500, Dow close at records fourth session

US stocks ended mostly higher on Tuesday as Federal Reserve started its two day meeting. The dollar strengthened on rising producer-price inflation data: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.2% to 94.084. The S&P 500 gained 0.2% to record high 2664.11 led by telecom and financial shares. Dow Jones industrial average rose 0.5% to new record 24504.80. The Nasdaq composite index however slipped 0.2% to 6862.32.

As Dow and SP 500 closed at records fourth session in a row the Federal Reserve will announce its decision at 20:00 CET today. A 0.25 percentage point increase in interest rates is seen as a virtual certainty. While the rate hike is fully priced in the central bank’s view on economy and inflation may cause market volatility. Recent data boosted the rate hike likelihood: US producer price index jumped 0.4% in November, gaining 3.1% over the past 12 months. And November reading on small-business confidence rose to its second-highest level on record. On the negative side the US ran a $139 billion budget deficit in November, up from a $137 billion deficit in the previous month.

Energy and technology stocks lift European markets

European stock indices recovered on Tuesday led by energy and technology stocks. Both the euro and British Pound fell against the dollar. The Stoxx Europe 600 climbed 0.7%. German DAX 30 rose 0.5% to 13183.53. France’s CAC 40 jumped 0.8% and UK’s FTSE 100 gained 0.6% to 7500.41. Markets opened 0.1%-0.3% lower today.

Strong data failed to boost euro and Pound: The ZEW economic conditions index in Germany rose to 89.3 in December, from 88.8 in November. And UK inflation in November was at its highest since March 2012, hitting 3.1%. That was more than a full percentage point above the Bank of England’s 2% target.

Higher oil prices buoy Asian stocks

Asian stock indices are mostly higher supported by rising oil prices. Nikkei fell 0.5% to 22886.50 on stronger yen against the dollar despite a more-than-expected 5% rise in core machinery orders in October. Chinese stocks are higher: the Shanghai Composite Index is up 0.7% and Hong Kong’s Hang Seng Index is 1.4% higher. Australia’s All Ordinaries Index rose 0.1% with Australian dollar extending gains against the greenback.


Oil higher on expected US crude draw

Oil futures prices are edging higher today on expected US crude inventory drawdown. The American Petroleum Institute industry group reported late Tuesday US crude stocks fell by 7.4 million barrels last week while gasoline stocks rose. Prices fell yesterday on uncertainty about North Sea pipeline outage duration after the Forties pipeline was shut down in UK. February Brent fell 2.1% to $63.34 a barrel Tuesday. Today at 16:30 CET the Energy Information Administration will release US Crude Oil Inventories.


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