Europe attempts to follow FOMC-led rally

Equities in Europe are trying hard to take advantage of a dovish, US Federal Reserve-led rally in the States last night.

Federal Reserve
Source: Bloomberg

The S&P 500 had its best day of the year, rising a shade over 2% to close back above the 2000 level. While the 'considerable time' statement remains in the minutes despite some reports to the contrary, the fact it changed its language slightly, and highlighted a 'patient' stance on when rates will start going up, maintained the dovish theme. The comments by chair Janet Yellen, that this alteration in language did not actually mean a change in its outlook helped put a rocket under equities for the final part of last night’s session. 

In the UK, the early enthusiasm was waning until a knockout retail sales number demonstrated some committed Christmas shopping from the consumer. Oil names are seeing mild gains as the price of crude has rebounded by a dollar so far today.

United Utilities (-1.5%) leads the market lower having been the only blue chip to lose its dividend attraction. Having gained around 75 points at the open, the FTSE 100 has cooled slightly, 50 points higher at 6388. 

European indices are having a better day of it, with a bumper 2% gain for the DAX, helped by a solid IFO expectations survey release in Germany — a keenly watched indicator. This has also confirmed what the last ZEW figures told us; that there is a brighter outlook into next year for the German economy.

Eyes are somewhat on Russia again this morning, as Vladimir Putin is addressing his people. All seems to be well for him in his Moscow bubble, and at least as he speaks the dollar only buys around 60 Rubles, not quite as many as the 70 it bought 24 hours ago. In a speech much more likely to hold up to scrutiny, interesting comments from the Swiss National Bank’s Thomas Jordan told us that events in Russia have had a big impact on the CHF.

Russian inflows caused the SNB to be active in defending its €1.20 EUR/CHF peg, and the announcement today of negative interest rates on deposits has helped push the pair away from that level. So far the move has not gained that much traction, and one expects it will be calling its FX brokers again shortly as it tries to fight the burden of currency strength that comes with being Europe’s safe haven. 

Not content with last night’s gains, US futures are steaming ahead in early trade. Currently the moves would give us an opening call of 17,510, another 160 points higher for the Dow Jones, and 20 extra points for the S&P 500, at 2033. 

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