Insights to the thinking of the US Federal Reserve boards and a collapse in oil prices left investors in a cautiously optimistic mood overnight. The latest episode of the Greek soap opera was shot in Moscow, but European stock weakness turned to US strength. Lighter than average share market volumes around the globe point to a lack of conviction at current market levels.
The release of FOMC minutes puts the board in line with investors – no-one knows exactly when US interest rates will rise. While talk of a June hike unsettled some, the revelation that some voting members think 2016 is the likely start of normalisation gave comfort that the Fed remains responsive to economic developments. Comments attributed to the New York chair suggest GDP growth may overtake employment numbers as the key indicator of Fed action.
Supply induced falls in oil prices are good news for economies, and added to the positive tone of US trading. However, resource intense bourses such as the ASX may drop today as the downdraft spreads to commodities generally, despite a weaker USD. Copper and gold both fell, potentially snapping the appetite for materials as well as energy stocks, and dragging down the recent best performers.For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.