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Despite some falls in stocks going ex-dividend, the FTSE has still managed to post a positive performance so far today, as oil and gas firms are pushed higher in the wake of further news from Iraq. These stocks are gaining on expectation of higher oil prices, but in the longer term a surging price of oil can only be a bad thing for both stock indices and the still fragile economic recovery in the West. However, even with the usual caveat about today’s Federal Reserve meeting, it seems like most indices have found their feet again, with the latest dip now out of the way.
Minutes from the Bank of England struck an odd tone, neither entirely backing up Mark Carney nor completely distancing themselves from his Mansion House speech. The bank might think the market has become too relaxed about a rate hike in 2014, but on the back of today’s minutes most policymakers are still worried that growth is too weak. To raise rates only to cut them again would be the height of folly, even without considering the deleterious impact on the bank’s reputation. The clearest response came from GBP/USD, which surged before dropping lower, on disappointment that the minutes seemed to contain no follow-through to Mr Carney’s Mansion House comments.
US markets seem to have finished their short-lived dip, but ahead of the Fed meeting enthusiasm is in short supply. Most traders believe that the best course is to wait and see how the decision and press conference develop. Like the BoE, the Fed is still highly divided, and in the absence of a strong caucus in favour of rate hikes, the current policy of ‘steady as she goes’ is the most likely winner.
Ahead of the open, we expect the Dow Jones to start unchanged at 16,807.