Equity markets shrug off fears and rally into the close

Once again we have seen thinner equity trading volumes, even by recent standards, today.

Nevertheless, of those few brave enough to trade equities ahead of tomorrow’s Fed comments, the majority seem to be of a bullish persuasion.

The increasing levels of inflation that the average UK resident is suffering look unlikely to improve in the short term. In fact, with the Bank of England continuing to have its hands tied, it looks likely that there will be little to reverse this trend. The US has also seen interest rates increase, but broadly this will be taken as welcome news by members of the FOMC.  It is hard to consider any of this as more than foreplay ahead of tomorrow’s speech, at 7pm (London time), by Fed chairman Ben Bernanke. Equity markets were always going to have to wean themselves off the ready supply of cash that the quantitative easing process supplied.

America is further down the road to recovery than most economic regions, and therefore better placed to handle this news. Regardless of how many times ECB president Mario Draghi reiterates that the EU has turned a corner, equity traders have yet to see the economic data to back up these claims, and will be reluctant to believe Brussels without proof.

Tomorrow could well be a volatile day, as all eyes will be turned to the US.

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