21.09.2016 - We expect a rise in volatility after the speech of the Fed’s chairwoman
The American stock market yesterday showed minimal growth, despite weaker-than-expected statistics on the housing market in the US, which is the key for the economy. Thus, the number of building permits has increased in August to 1.14 million vs. expected 1.17 million, while the number of housing starts totaled 1.14 million, that is 0.05 million below expectations. Investors are waiting for the publication of the Fed's statement on monetary policy and economic outlook (18:00 GMT), as well as a press conference of the head of the Federal Reserve Janet Yellen (18:30 GMT) during which we can hear hints on the timing of further Fed interest rate increase. Economic forecasts can be improved because of the revision of the impact of the UK’s exit from the EU. In case of growing probability of the Fed tightening of monetary policy until the end of the year, we will see a fall on the US stock markets. Our medium-term outlook remains negative.
European stocks today show a positive dynamics against the background of rising oil prices and other commodities. Activity on the market is constrained by waiting for the publication of the Fed's statement on monetary policy, which greatly affects the movement of global stock markets in the coming months. It is worth noting that today will be published quarterly report of the Bank of England on the state of the economy (8:30 GMT), which will point to the first effects of the results of the referendum on the UK's membership of the EU. Tomorrow investors will assess today's news from the Fed and the speech of the ECB Mario Draghi and statement of the Committee on the financial policy of the Bank of England. We expect an increased level of volatility in the next few days, and maintain the medium-term negative outlook.
Markets in the Asia-Pacific region showed a positive trend. The leaders of growth were Japanese indexes, due to the weakening of the yen and the Bank of Japan’s statement on monetary policy. Thus, interest rates will remain near zero for over 10 years, and the quantitative easing program will continue until reaching the level of inflation at 2.0%. In addition, Japan's central bank will continue to consider the possibility of further reducing the interest rate on deposits. Tomorrow in Japan is a day off. The Australian market was supported by rising commodity prices. The dynamics of trading in the near future will be affected by news from the US. Our medium-term outlook remains negative, but in Japan the growth can support the reduction of the yen.