Markets remain optimistic in wake of FOMC

In the wake of last night’s Fed meeting, the FTSE has held up well, holding around 6000 despite some nervousness in US markets.

Federal Reserve building
Source: Bloomberg

There was enough in last night’s Federal Reserve statement to suggest the US central bank is tiptoeing away from the idea of four rate hikes to maintain the rally in equity indices for another day. The ongoing rally in crude is helping the mood as well – up days for this commodity tend to lead to gains for stock markets, but it would be unwise to declare the end of the slump in crude prices just yet.

Anglo American is the latest miner to issue a production update, and the market reaction has been very positive, with the shares racing 9% higher. The gain from the low of last week is a remarkable 30%, but any real turnaround in the price will need a shift in fundamental demand patterns, which does  not appear to be forthcoming.

UK GDP growth was higher in the final quarter of the year, but again the services sector was the main contributor to the better reading – the rebalancing of the UK economy is proving to be a very tricky task. The news was enough to push the pound back up to $1.43 against the US dollar, although there is a long way to go before all of January’s losses are recovered.

The Fed and Facebook dominated attention last night, with the former acknowledging that the situation looks a tad grimmer than in December, although for now they haven’t fully abandoned their plan to hike rates four times this year. Facebook’s earnings were suitably positive, and with Netflix having done well, the focus is now on Amazon to keep the good news flowing.

Ahead of the open, we expect the Dow Jones to start at 16,028, up 84 points from last night’s close.

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