US GDP data surprises markets
US GDP growth skidded to a halt in the first three months of the year, sliding from 2.6% to 0.1%, nothing more than a rounding error. Even considering that the first GDP figure is based on incomplete data, the first quarter is not going to see growth of any meaningful scale.
Strong readings on the ADP number and Chicago PMI helped to counter the negative tone, with the net result being that US markets have barely moved so far in the session.
There is no statement or press conference tonight following the Federal Reserve meeting, which eliminates the chance of any unforced errors from Janet Yellen, so there is a real possibility that the US session will end much like its European counterpart, with a directionless drift.
Shell trying to prop up FTSE
Shell is still doing its level best to keep the index above water this afternoon, helped along by Rolls-Royce, which has been lifted by news of talks with Siemens about the sale of its energy unit to the German firm. But with the Federal Open Market Committee on the calendar today traders can’t be blamed for not wanting to give the index much of a push higher from its current levels, especially after a shock US GDP reading that was much weaker than feared.
Weighing down the index was British American Tobacco, down 1.9%. Volume declines may have slowed, but many investors are fretting that the old dividend paying stalwarts of the tobacco industry are facing much tougher times ahead, as hitherto strong markets see continued shrinkage in demand.
US data weighs on Brent
The US GDP disaster has brought out the sellers in crude oil, with Brent falling 0.9% to $107.90 and NYMEX slumping below $100 for the first time since the beginning of April. Fears about slowing US growth may drive the price lower in the short term, especially since the Ukraine situation appears to be quiet for the time being.
GBP/USD benefits from poor US data
Yesterday’s UK GDP reading and today’s abysmal news from the US has proved to be just the tonic to lift GBP/USD to its highest level in over four years. The gap between the policy approaches of the Fed and Bank of England continues to widen, with the weight of expectations being that Threadneedle Street will hit the rate hike button well in advance of its cousins in Washington. Even if we do see some hefty selling in GBP/USD, the likelihood is that $1.68 will continue to prop up the currency pair.