FOMC greenlights equity rally

FOMC taper lifts Wall Street

A fence-sitting FOMC which announced a long-overdue tapering, but stuck to its no rate hikes and transitory inflation line was enough to greenlight another rally on Wall Street overnight, which was happy to keep the momentum of the impressive Q3 earnings season going. It was another record close as the S&P 500 rose by 0.65%, with the rate-sensitive tech-heavy Nasdaq leaping 1.04% higher. The Dow Jones tracing out a more modest 0.29% gain. US yields firmed overnight but that appears to have weighed more on the Dow Jones while the FOMO gnomes feasted on the S&P and Nasdaq.

 

The FOMC and Wall Street’s reaction after has been enough to greenlight a positive day in a holiday-thinned Asia. The Nikkei 225 has jumped by 0.92% with the South Korean Kospi rising by 0.77%. China has ignored another liquidity withdrawal by the PBOC, with pent-up demand seeing the Shanghai Composite rise 0.65% and the CSI 300 leap 1.0% higher. Hong Kong is recording some decent gains as well, rising by 0.85%.

 

In regional Asia, Singapore and Kuala Lumpur are closed with Taipei climbing 0.40% while Bangkok is unchanged with Jakarta rising by 0.90%. In Australia, markets are rebounding after a tough week so far. The ASX 200 and All Ordinaries climbing by 0.35%. The FOMC decision should see European markets open higher today, while it is hard to see anything other than a huge drop in Initial Jobless Claims derailing the positive momentum in US markets this evening.

The rest of the week will be busy, culminating with Friday’s US Non-Farm Payrolls data. Overnight, ADP Employment surged higher, while the US ISM Non-Manufacturing PMI and sub-indices suggest that the services sector is back with higher activity and costs, after a Q3 delta-induced slowdown. The risks are now skewed towards the Non-Farms finally aligning with signals elsewhere in the US economy, after a few weak readings. A number north of 500K could cause equity markets to reconsider ignoring the implications of the Fed taper. Similarly, a low print will provide fuel for the lower-for-longer monetary party in equities.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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