IFC Markets - Analytics

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    Awaiting Federal Reserve interest rate decision

    US stocks ended sharply higher on Tuesday following a rebound in oil prices. The dollar weakened as investors awaited for the Federal Reserve interest rate decision. According to live dollar index data the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, fell 0.3% to 99.099. The S&P 500 gained 1.4% higher at 1903, with all ten main sectors closing in black led by energy stocks, up 3.8%. The Dow Jones Industrial closed up 1.8% at 16,167 and the Nasdaq Composite added 1.1%. Energy services company Williams Companies was the best performer among S&P500 constituents rallying 11.5%, Chesapeake Energy jumped 8.1%. The rise in oil prices bolstered market sentiment, which was lifted also by positive economic news. Consumer confidence came in better-than-expected at 98.1 in January from 96.3 in the previous month. And the S&P and Case-Shiller home price index showed that the growth in US home prices during November was the biggest in 16 months. Today US Federal Reserve Open Market Committee federal funds rate decision and statement will be released at 20:00 CET. Market participants anticipate no change in federal funds rate but are looking forward for the central bank’s view on current strength of US economy. Many analysts expect a more dovish statement from the policy makers in light of recent market turmoil with Fed fund futures implying just one rate hike this year compared with four hikes indicated by the Fed policymakers' last statement. This partly accounts for dollar’s recent weakness. Today at 13:00 CET weekly Mortgage Applications will be published in US. At 16:00 CET December New Home sales will be released. The tentative outlook is positive.

    European stocks advanced on Tuesday helped by higher oil prices. The euro strengthened against the dollar as investors anticipated a dovish statement from the Federal Reserve. The Stoxx Europe 600 index ended 0.9% higher driven by gains in commodity, industrial, utility and financial stocks. Germany’s DAX 30 rose 0.9% to 9822.75, and France’s CAC 40 gained 1.1%. Tullow Oil rallied 11%, Spain’s Repsol jumped 4.3% and Statoil gained 2%. Dutch electronics manufacturer Royal Philips gained 6.1% after the company said operational performance continued to improve as it separated its lighting division. Today December Mortgage Approvals by British Bankers’ Association in UK came in lower than anticipated, while the German Gfk consumer climate index for January was higher than expected at 9.4 compared with a 9.3 reading in the previous month.

    Nikkei rallied 2.7% today to a two-week high as investor confidence was boosted by a rebound in US stock market overnight. Chinese stocks edged lower today after over 6% plunge on Tuesday, bringing year-to-date losses to about 22% or $1.8 trillion. In an effort to boost the economy by improving Chinese companies' access to credit China's government has told financial institutions to step up support for the real economy.

    Today at 21:00 CET Reserve Bank of New Zealand interest rate decision and statement will be released. The central bank is expected to leave the interest rate unchanged at 2.5%.

    Oil futures are falling today following a surprise rise in US inventories after a rebound on Tuesday on hopes that major oil exporters Saudi Arabia and Russia may cooperate in considering a production cut at an emergency OPEC meeting. March Brent crude gained 4.2% to $31.80 a barrel on Tuesday. At 16:30 CET today US Crude Oil Inventories will be published by Energy Information Administration. US inventories are expected to rise, according to the American Petroleum Institute report US crude stocks rose by 11.4 million barrels last week to 496.6 million.

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