Equities rally ahead of FOMC

In the face of a potential rate hike, equities surge, while US inflation stagnates as the markets await the outcome of the FOMC meeting.

Federal Reserve building
Source: Bloomberg

Global indices are rallying ahead of tomorrow’s crucial Fed rate decision, with the FTSE looking set to post the strongest day of gains in over two months. Just as the euro sold off in advance of the ECB meeting, the past month has seen stocks shorted heavily ahead of tomorrow’s FOMC meeting. Yet the subsequent rally in the euro may have served as a lesson, for today we are seeing the buyers come back in to stock markets to reflect the notion that we may once more see traders ‘buy the rumour, and sell the fact’.

The final piece of the jigsaw was released today, with today’s US inflation data providing the last economic release before Yellen and co deliver their momentous decision. With monthly US CPI falling to 0% in November it is clear the main basis for a rate hike is the strength of the jobs market rather than price stability. However, with Yellen having backed herself into a corner over a 2015 move, any decision to hike would clearly say that disinflation worries have been largely disregarded in the hunt for higher rates.

Supermarkets make up some of the best performers in the FTSE 100, following the latest Kantar Worldpanel report which reports on market share and sales. Up over 4% today, J Sainsbury represents the only top-four firm to grow both sales and market share, despite competition from Lidl and Aldi.

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