Investors upbeat ahead of FOMC rate decision

Wednesday, October 29, 2014

Asian benchmark indices built on near term support levels as the positive sentiment from both the European and US sessions managed to hold firm overnight. Investors were generally positive ahead of the conclusion to the FOMC’s two day meeting with the majority expecting the Fed to conclude its monthly asset purchase programme. Japanese shares gained further support from better than expected industrial production data which increased 2.7% m/m against expectations of a 2.2% increase. Chinese mainland stocks extended the previous session’s gains as the CSI 300 and Shanghai Composite added 1.35% and 1.43% respectively after increased expectations of further stimulus by the PBOC.

The Fed is expected to announce its final taper of asset purchases bringing an end to its third round of QE which began in 2012. However, the central bank still has its work cut out and after the expected tapering of the last $15bn of bond purchases this month the focus will shift towards market volatility. Forward guidance in recent months has more or less emphasised the rhetoric of previous FOMC meetings with particular attention to the prospect that interest rates will be kept low for some time, bringing an element of calm to global markets at a time when growth concerns in Europe and China and geopolitical risk events in the Middle East and Ukraine keep investors on edge. Investors will also be on the lookout for details regarding the Fed’s inflation outlook and any potential risks its poses to the economy.

Front month WTI prices rebounded yesterday after reaching a fresh year-to-date low on Monday on speculation that fuel demand was increasing. Benchmark prices rallied a percentage point higher and snapped a two day losing streak after API data released yesterday indicated distillate stockpiles including heating oil and diesel most likely fell by 3m barrels w/w while gasoline stocks were seen to have declined by 3.7m barrels w/w. Market participants polled by Bloomberg expect the official EIA data to show a 663K and 763K drawdown in gasoline and distillate stocks respectively. Despite the expected declines in refined products the API report indicated an expected 3.2m barrel build in crude stocks over the past week, broadly in line with analysts surveyed by Bloomberg who expect this week’s official EIA crude oil stockpiles to increase by 3.1m barrels w/w.

September Japanese industrial production came in stronger than expected

JNIPMOM Index Japan Indices Of 2014 10 29 07 19 19

Front month WTI prices rebound on demand expectations 

CL1 Comdty Generic 1St CL Fut 2014 10 29 07 39 35

Events for today

0930

UK

Sep

Consumer Credit

1530

US

w/e

EIA Energy Stocks

1800

US

Oct

FOMC Rate Decision

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