Markets melt up
Traders and investors caught short heading into the FOMC scrambled for cover in Europe and the US, in many cases driving indices to their best one day performance for 2015. Overnight trading delivered broad market gains between 2% and 3.5%, despite lower commodity prices and weaker data.
In the long run, markets are driven by fundamental factors. However short term movements are more complex, and market positioning can trump all other factors. General gloom on growth, a failed Santa rally and oil prices meant traders and investors were short or underweight heading into the Fed’s last meeting for the year. Volumes were well above recent averages. Most markets finished near their highs, pointing to potential further gains over the coming trading sessions.
Stronger UK retail sales supported the rallies, but weaker US services activity and Philadelphia business conditions were ignored. Futures markets are indicating gains better than 1% at opening calls across the Asia Pacific region today. However, strong rises yesterday and falls in oil and copper overnight may moderate enthusiasm during trading today.
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.
Frequently Asked Questions about this Article…
The recent market rally was driven by traders and investors scrambling for cover ahead of the FOMC meeting, leading to broad market gains despite lower commodity prices and weaker economic data.
The anticipation of the FOMC meeting caused traders and investors to adjust their positions, resulting in significant market gains as they covered shorts and increased their market exposure.
Markets performed well because the focus was on market positioning and the need for traders to cover shorts, which overshadowed the impact of weaker US services activity and Philadelphia business conditions.
Stronger UK retail sales supported the market rallies by providing a positive economic signal amidst the general gloom on growth and other negative factors.
Market volumes were well above recent averages, indicating heightened trading activity as investors adjusted their positions in response to the FOMC meeting.
Futures markets are indicating gains better than 1% at opening calls across the Asia Pacific region, although strong rises and falls in commodities may moderate enthusiasm.
Enthusiasm might be moderated due to the strong rises in previous sessions and overnight falls in oil and copper prices, which could impact investor sentiment.
For further commentary on the market situation, you can contact Michael McCarthy at CMC Markets by calling 02 8221 2135.
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