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Reports UK

UK stock market commentary (June 19, 2014): FOMC Gets Busy

June 19, 2014, Thursday, 05:36 GMT | 00:36 EST | 09:06 IST | 11:36 SGT
Contributed by Capital Spreads

European equities are set to open up this morning after a bullish close in the US and a buoyant Asian session. The positive outlook in the FOMC statement caused rallies in the European and US Indices alike and was more volatile than expected. With a relatively quiet end to the week on the economic calendar front, will investors hold onto there bullish positions over this small upswing in the last few days.

The Federal Open Market Committee reiterated pulling the plug on QE in measured steps as the economic growth continues to bounce back. At the same time the Fed stood by their previous decision to keep interest rates at record low levels for a ‘considerable time’. Investors took joy in those reassurances and pushed the Dow Jones 90 points higher to 16,893.

Slight caution ahead of the FOMC meeting triggered a rally in euro against the US dollar from the morning session. As the market realised the dovish tone is here to stay for longer, the shared currency continued its rally, gaining 49 pips to 1.3595.

The WTI crude prices dropped 38 cents yesterday to $105.73 a barrel as Fed’s dovish stance moved investors into equities. However, reports of US oil supplies shrinking combined with the escalating sectarian violence in Iraq pushed the market price back up. In particular news that oil companies started to remove employees from Iraq indicates the possibility of full blown conflict including military intervention?

Demand for gold as an alternative asset was revived by the Fed’s statement yesterday saying interest rates will remain on hold. That pushed gold prices $5.7 up to $1277.6. Despite a shift in the short term trend to bullish, the medium term outlook is still firmly bearish.