Markets in the red post Fed

The FTSE 100 is rallying once more, as the UK index attempts to regain some of the ground lost in the fallout of yesterday’s hawkish FOMC statement.

Federal Reserve
Source: Bloomberg
  • Oil spike and hike could be good for market
  • Investors worry as oil majors continue to suffer
  • Chinese one-child policy boosts New Zealand prospects
  • US GDP inconsistency difficult for Fed planning
  • Barclays shareholders would likely wish Bob was back

We are seeing a second oil spike in as many days, which is helping ease some of the early losses seen in the FTSE 100. Despite another burst higher for oil prices, the optimism within the sector continues to deteriorate as investors watch one major after another suffer from historically low prices and multi-billion writedowns.

Today was Shell, while tomorrow we watch out for Chevron and Exxon. Different companies yet the message is sure to be the same, with higher costs of scaling back operations and writedowns in accordance with lower oil prices.

Barclays’ pre-tax profits tumbled 29% in Q3, providing more than a hint as to why the firm has welcomed new CEO Jes Staley. He is only supposed to take up the reins in December, but we have already heard a plan to spend £1 billion more on restructuring the firm. Unfortunately the fact is that many would be happy to see Bob Diamond still in charge, and without the action of the FCA this would be the case.

Changing the culture of the firm is difficult and it would be hard to put a monetary value on it, but the cold hard fact is that shareholders care about one thing, the bottom line, which continues to suffer. 

China today gave the go-ahead for a baby boom as the one-child policy turned to a two-child policy. A nine-month delay appears a sensible timeline until companies truly feel any benefit to this measure, but the spike in NZD/USD shows that investors have already begun to factor in a greater future demand for dairy exports.

US GDP gave yet another indicator of why markets believe a December rate hike is optimistic at best from the Federal Reserve, with the headline rate falling back to 1.5%.

Certainly this quarter was more than overcome by an outstanding revision to Q2, which saw a reading of 3.9%. Yet, there is an issue of consistency and with each and every US economic release comes a feeling that the stability needed for a hike is not quite there yet.

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