Dovish comments from Fed Chair encourage risk assets

Tuesday, April 01, 2014

US equity markets were supported higher on Monday as dovish comments from Janet Yellen supported both the S&P 500 and DJIA higher for a second consecutive session. Concerns that an interest rates rise was coming sooner than expected after hawkish comments from the Fed Chair during March’s FOMC meeting had caught investors by surprise, with many torn between the prospects of tightening monetary conditions amid a backdrop of mixed macro data. However, nervous investors could breathe a sigh of relief as Yellen stated that stimulus measures would be in place for “some time to come”, easing concerns that a rates rise would be on the cards soon after the end of QE. 

The official Chinese manufacturing PMI reading rose slightly to 50.3 from 50.2 in February, prompting benchmark equity indices both on the mainland and listed in Hong Kong to push higher. The Hang Seng rose to a three week high, adding 0.9% throughout the session, however, HSBC’s final manufacturing PMI reading reinforced concerns that growth momentum was slowing, posting a reading of 48.0 for March, slightly below the preliminary reading of 48.1. For the meantime it seems as if Yellen’s comments have increased optimism among investors. It seems that a combination of continued speculation that Chinese policymakers will boost stimulus efforts as well as the expectation that the ECB will announce steps to combat the threat of deflation during this Thursday’s meeting could give market participants the assurance needed and subsequently improve appetite for risk assets.  

A busy day for economic data today with the release of eurozone and UK manufacturing PMI numbers later this morning and personal income, ISM manufacturing and Dallas Fed data over in the US later this afternoon will keep investors engaged. A tentative tone has dominated markets in recent sessions as mixed macro data and speculation over US rates rises as well as geopolitical tensions see risk assets trade with increasing volatility.

HSBC's final China manufacturing PMI reading raises concerns of slowdown

MPMICNMA Index HSBC China Manuf 2014 04 01 07 35 25 

Dovish comments from Yellen see gold close below $1,285/oz yesterday

XAU Curncy Gold Spot Oz 2014 04 01 07 54 45 


Events for today

0200

CN

Mar

Manufacturing PMI

0245

CN

Mar

HSBC Manufacturing PMI

0855

DE

Mar

Manufacturing PMI

0900

EZ

Mar

Manufacturing PMI

0930

UK

Mar

Manufacturing PMI

1330

US

Jan

PCE & Personal Income

1400

US

Mar

ISM Manufacturing

1400

US

Apr

IBD Sentiment

1430

US

Mar

Dallas Fed

OE:

May  Sugar (LIFFE)

Topics: US Fed, Gold, ECB, PMI
More from: Kash Kamal