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Markets bounce ahead of the Fed

Indices have bounced, and oil drags the FTSE higher, and the FOMC is expected to hold – but will clarity spark the markets into life?

London City skyline
Source: Bloomberg

FOMC remains the watchword today, as markets rally ahead of what is expected to be yet another ‘no go’ from the Fed. The weakness of oil prices over the past two weeks has acted as a hindrance to the FTSE, which is heavily reliant upon mining and energy firms. Yet with today’s 5% rise in US crude prices, the commodities market has lit the fuse under equities markets once more, dragging the FTSE higher.

There is a lot of talk about how Yellen and company will attempt to provide more clarity to the markets today, which coupled with the raft of poor economic data recently, points towards inaction this month. Should that occur, the idea that the Fed will provide fresh insight makes it likely  that a more definitive timeline could be in the offing. The clearer the Fed is, the more the markets will move.

US crude inventories rose for the fifth consecutive week, posting a 3.4 million barrel build-up. Interestingly, a pre-announcement spike gave greater direction than the reaction itself. Given the recent shift into a major technical support zone around $43.00, there is a good possibility that crude prices could recover yet further.

Apple earnings provided the US stock market with a welcome pre-FOMC boost, surprising many by posting near doubling of revenues from its Chinese operations. The Chinese slowdown is clearly not a big issue for Apple, which has continued to expand within a previously underdeveloped region for the firm. China is in no way at saturation point, as has been the suggestion for Western markets and thus there is no reason to believe Chinese sales will not continue to grow.

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