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Sometimes all it comes down to is a single sentence. Janet Yellen will be pondering over her performance last night, after she spooked markets with talk of an earlier-than-expected rise in US interest rates. Although the Fed’s statement implied there would be a ‘considerable’ gap between the end of QE and the first rate hike, Yellen’s definition of considerable as ‘around six months’ wasn’t as long as some had hoped.
The upshot is that tightening jitters are abroad in markets once again; traders had hoped for a decent breathing space of around a year between the two events, but now June 2015 looks to be the starting point. Maybe Yellen is made of sterner stuff than her predecessor – it does look as if she is willing to stare down markets rather than being blindly carried along by events.
Retailer Next unveiled its now customary strong results, and it has surpassed M&S in profits for the first time. The recovery has been driven by consumer spending, and Next has done well out of this. Usually the shares pop by more than the 1.5% we’re seeing this morning, but the cautious outlook is keeping gains in check. Still it’s proven unwise to stand in the way of the Next share price over the last five years, even if £68 is still the level to beat.
Quiet has descended on the insurance sector after yesterday’s carnage, but it is unlikely to stay at rest. It is now up to the companies concerned to prove they’re not permanently hobbled by the annuities change in the Budget, and to convince investors that they’re still a worthwhile proposition.
It’s a busy afternoon for economic data in the US, with jobless claims, existing home sales and the Philly Fed all on the list. But the main effort will be concentrated in further parsing of the Fed statement. Ahead of the open, we expect the Dow Jones to start 25 points lower at 16,198.