Fischer's weekend comments set a soft tone
Early indications are that reaction to the weekend comments of Fed Vice Chairman Stanley Fischer will provide a nervous start to trading this morning. Mr. Fischer expressed his belief that inflation will move higher as the current forces holding it down dissipate. This line of thinking suggests that the Fed will look through short term inflation concerns and begin the process of a very gradual normalisation of interest rates this year.
After Fischer’s comments, the immediate focus for markets is now likely to be the somewhat second order issue of whether the first Fed rate hike will come in September or December. Friday’s jobs report and the extent of market volatility over the next couple of weeks may determine the answer.
Nervousness about the Fed has led to US futures dropping this morning suggesting that the Australian market could struggle to hold onto the small gains implied by the steady close to US markets on Friday. This came as a relief being the first relatively quiet trading session after seven days of large trading ranges and high volatility.
Energy stocks are likely to be a feature of today’s Australian session. Two very strong days in the oil market after two months of relentlessly lower prices will have shareholders in energy stock hoping for some ongoing relief. If the US oil price is able to consolidate above $40 for a while, some of the worst fears about near term energy company results will be relieved.
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Frequently Asked Questions about this Article…
Stanley Fischer's comments about inflation and interest rates have created a nervous start to trading, with US futures dropping and potential struggles for the Australian market to maintain gains.
Fischer believes inflation will rise as current suppressing forces dissipate, suggesting the Fed may begin a gradual normalization of interest rates this year, looking past short-term inflation concerns.
The next potential Fed rate hike is being speculated for either September or December, with upcoming jobs reports and market volatility likely influencing the decision.
Energy stocks may see some relief in the Australian market due to recent strong days in the oil market, especially if US oil prices stabilize above $40.
The oil market has experienced two very strong days after two months of declining prices, offering hope for energy stock shareholders.
Nervousness stems from uncertainty about the timing of the Fed's rate hike and its impact on market stability, as indicated by recent volatility and trading ranges.
The timing of the Fed's rate hike could be influenced by the upcoming jobs report and the level of market volatility over the next few weeks.
Investors can stay informed by monitoring market trends, following economic reports like the jobs report, and seeking expert commentary, such as from CMC Markets.
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