Traders left in the dark over interest rate rises

In mid-morning trading the FTSE 100 is in the red as last night's subdued outlook for the US economy by the Federal Reserve weighs on stocks.

Source: Bloomberg

The US’s sluggish start to 2015 led to a dull statement from the Fed last night, and it is still hanging over the equity markets. It appears that the US central bank is as unclear about an interest rate rise as the market is. The US is still on track to increase interest rates this year, but traders are still in the dark over when exactly rates will rise. The Fed’s statement was so wishy washy dealers didn’t even think to buy into the market as rates may still increase as soon as June.

The severe winter in the US hampered growth in the first-quarter, and unless economic indicators pick up soon the market will pencil a rate rise at the back-end of the year. Greece is still grabbing traders' attention, and Athens has softened its negotiating teams by taking Yanis Varoufakis off the front line, but the nation still has a noose around its neck in terms of its debt levels. Greece still has to hammer out a deal with creditors over reforms in order to receive the next round of financing, which will then be used to make repayments. It has been trapped in a merry-go-round of crisis talks and last minute repayments for several years and there is so sign of it getting off soon.

IG's general election binary is indicating the Conservatives will win 290 seats, and the market is indicating the Labour party will take 266 seats. It is also indicating the SNP will win 50 seats out of the 59 in Scotland, which compares with the Ipsos-MORI poll which suggests that the SNP could take every seat north of the border.

RBS shares are in the red again as hefty legal costs contributed to a larger-than-expected first-quarter loss. The bailed out bank is no closer to privatisation as fines and PPI provision will ensure the government will be a majority shareholder for many years to come.

Royal Dutch Shell is on the rise as the refinery business compensates for the collapse in the price of oil. Royal Dutch Shell can cope with a downturn in the energy market unlike its small rivals, and when energy prices start to rise again it will emerge more influential than ever.

We are expecting the Dow Jones to open 85 points lower, at 17,950, as the lack of clarity from the Fed sent traders running from the market. Traders will always sell if doubt has been added to the equation and we know as little as an interest rate rise now as we did this time yesterday. 

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