Fed minutes support market rally

Thursday, April 10, 2014

 US markets rallied higher yesterday building on recent gains after the recent sell-off as Fed meeting minutes pacified concerns regarding the timing of interest rate increases. Benchmark indices built on Tuesday’s gains as details from the minutes suggested that projections of future rates rises overstated results, leading to the possibility of a slower pace of increase. The minutes reinforced the dovish comments made by Yellen last month, who stated that stimulus would be needed “for some time”. Investors, speculating that interest rates may remain low for an extended period of time, will switch focus back to macro releases and corporate earnings, with Alcoa leading the rally in the basic materials sector after posting better than expected results. Investors will be paying close attention to the Fed budget and weekly initial jobless claims for further insight as well as the release of Q1 earnings from JPMorgan and Wells Fargo, due tomorrow.

Asian equities posted broad gains as the positive sentiment carried over from Wall Street. Chinese indices extended gains after consolidating around long term moving averages in the previous session despite a surprise fall in exports as investors were assured by the Fed minutes. Market participants had expected a 4.8% y/y increase in exports in March but were left disappointed when figures showed a 6.6% y/y decline. Imports also came in markedly below expectations, falling 11.3% y/y against 3.9% y/y growth predicted in March. Although growth in exports undershot its target the overall trade balance increased to $7.71bn in March, with exports rebounding significantly from the previous month’s sharp contraction.

Spot gold prices rose for a second session with prices early this morning extending gains towards $1,318, reaching a two week high on speculation of prolonged low US interest rates. Prices have found support at the 200 day MA in recent session with intraday rises testing resistance at the 50 day MA before pulling back for a close below.

Chinese trade balance swings to surplus

CNFRBAL Index China Imports 2014 04 10 07 39 17

Shanghai Composite rallies higher on Fed comments

SHCOMP Index Shanghai Stock Exc 2014 04 10 07 35 06

Spot gold prices gain on speculation of prolonged period of low US rates

XAU Curncy Gold Spot Oz 2014 04 10 07 44 22 


Events for today

0001

UK

Mar

RICS House Prices

1100

UK

Apr

BoE Rate

1330

US

w/e

Jobless Claims

1330

US

Mar

Import/Export Prices

1530

US

w/e

EIA Nat Gas

1900

US

Mar

Fed Budget

OE: 

May  Brent Crude (ICE)

 

Topics: US Fed, Equities, Gold
More from: Kash Kamal