Stocks slip after Yellen’s testimony

Stocks slide and the dollar moves higher after the Federal Reserve chair stated the US will hike rates at a gradual pace.

Source: Bloomberg

Stock markets rallied on the run up to Janet Yellen’s testimony to Congress, but there has been a small pullback after the Fed chair stated the US central bank is still planning to hike rates at a slow and gradual pace. Ms Yellen expressed concern for the large declines in global equity markets and the account of the Chinese economic slowdown, and stated the conditions for growth are no longer receiving that same support they once did.

The mixture of dovish and hawkish language left some equity traders wondering which way to turn but overall investors were reminded that the Fed want to continue on the interest rate hiking path, but rates are unlikely to change any time soon. The US 500 will need to retake 1872 before traders can be confident the rally since Monday evening will last. While Wall Street remains below 16,265, we could see a move to the downside.

The US dollar moved higher thanks to Janet Yellen’s testimony to Congress this afternoon and EUR/USD was one of the biggest fallers on the back of it. The currency pair is still in its upward trend and while it holds above the support at €1.1145, a move back towards €1.13 is possible. A big pullback in EUR/USD may find support at €1.1086.

Gold is still in positive territory but it is finding it hard to move higher after Janet Yellen’s comments about the interest rates in the US. The confirmation that the Fed is still aiming to raise rates this year is preventing the metal from retesting the recent high, but by the same token the bears are still waiting on the sidelines. The $1200 mark still remains the target to the upside and pullbacks could find support at $1181. Despite a drop in US oil inventories, the energy market is still heading lower. There was spike in the price immediately after the announcement, but it is now trading below the pre-release level. While US light crude is under $30 and Brent is below $32 traders will be looking towards the 2016 lows of the respective markets. 

FTSE 100 risers and fallers (as of 4.35pm) 

Company % change Index points
WorldPay Limited +5.80 +0.61
International Consolidated Airlines Group SA +4.84 +1.66
Mondi +4.72 +0.76
Prudential +4.40 +4.89
Tesco +4.32 +2.36


Company % change Index points
ARM Holdings -4.36 -2.24
Randgold Resources Ltd -3.47 -0.73
Ashtead Group -3.21 -0.51
Antofagasta -3.04 -0.17
TUI AG -2.86 -0.56

The look ahead to tonight

Corporate reporting:

US:  Cisco Systems Inc, Tesla Motors Inc, Twitter Inc

The look ahead to tomorrow

Corporate reporting:

UK: Rio Tinto,  Shire,Henderson, Informa, Ashmore Group, DairyCrest Group,Tate & Lyle, Cable & Wireless Communications, Enterprise Inns, Imperial Tobacco Group, Glencore, Thomas Cook Group, Grainger, Pennon Group

US: PepsiCo Inc, American International Group Inc

Economic: 1.30pm – US jobless claims: exp 280,000, prior 285,000

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.