The Fed continues to command attention

The Fed continues to hold investors’ attention, from the question over who is taking over from Ben Bernanke to the tapering debate.

The key event will be today’s conclusion of the FOMC meeting, with most expecting a September tapering. However, US data have been inconsistent; consumer confidence was slightly softer than expected at 80.3 vs. 81.3 estimated. The Fed is trapped in a position whereby traders expect them to address a timeline. Further reiteration of loose stimulus would risk a re-run of the volatility we’ve seen in bonds and equities.

A new pessimism

The sell-off looks to continue in the Nikkei. The market has turned from exuberance to pessimism after Prime Minister Abe’s election. The main focus has been the reluctance of Japanese companies to spend from the windfall of a weaker yen which shows the uncertainty they feel towards the future.

The Hang Seng and Shenzhen Composite lead with the best returns in Asian equities for the month of July, with over 5% return each. There have been powerful promises from China’s Politburo to keep growth at 7.5% this year. This could keep the momentum going for companies listed in Hong Kong and China, although we hold the view that the government aid will be sector-specific and aimed at construction of infrastructure such as rail. Technically, we see the HSI has broken out of the resistance level of 21,600 with the next resistance level at 22,465.

Commodities

Turning to commodities, the backdrop of slowing growth globally weighs on prices – what’s more important is whether China allows the country’s growth to slow, and at what rate. It’s clear today’s headline suggests officials will keep growth at the level they have indicated. Industrial metals could see some activity in the second half of the year, considering the additional infrastructure spending.

Copper prices failed to stay above the $320 level, finding sellers at these levels. Recent price action looks tired and our view will turn bearish if it fails to hold the support of $300. Arguments for the recent strength were low inventories and trades expecting continuous stimulus from the Fed. Traders have changed their sentiment after Chinese cities missed growth estimates. Today’s trading will be key to whether the recent floor it found is no longer valid; our bias is towards further softness.

WTI dropped below our short-term support level of $104 on fears of slowing growth in the US. This slide could continue with WTI to trade below $100 a barrel. The underlying support for energy prices has been from geopolitical tensions in the Middle East, renewed optimism on global demand and low inventories. These factors look short lived and waning.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Een artikel zoeken

Form has failed to submit. Please contact IG directly.

  • Ik wens per e-mail informatie van IG Group bedrijven te ontvangen over handelsideeën en IG's producten en diensten.

Voor meer informatie over hoe wij uw gegevens mogelijk kunnen gebruiken, bekijkt u ons Privacy- en toegangsbeleid en onze privacy website.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.