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Markets await FOMC monetary policy update


US equity markets closed marginally higher on Tuesday as markets paused for breath ahead of the Federal Open Market Committee (FOMC) May monetary policy update and awaited key Q1 earnings updates. Despite underperforming against it’s peers, the tech-focused Nasdaq Composite posted yet another all-time record high, while the blue-chip S&P500 closed within 10 points of a fresh high. The closely followed Dow Jones outperformed, up 0.2% on account of the latest deluge of Q1 earnings.

Accendo Markets Analyst, Mike van Dulken noted – “a disappointing after hours earnings release from tech giant Apple saw the world’s most valuable company’s share price trade around 2% lower in after-market trading. The company missed analysts’ revenue expectations while reporting only its second quarterly iPhone sales decline ever.”

With the FOMC releasing its monthly rate decision guidance today, investors do not think there will be any change to policy, so the focus will be on the accompanying statement.

ADS Securities Analyst, Konstantinos Anthis commented – “The Dollar remains well bid ahead of the meeting even though the latest US data does not support the case of the Fed raising rates again soon. The US currency traded higher against the Yen and Gold, held steady against the Euro and ended the day marginally lower versus the Pound on the back of the UK Manufacturing PMI figures. But the key question in analysts’ minds this morning is why investors appear so optimist ahead of the Fed decision amid weaker figures from the States over the past weeks.”

A busy week for data continues today with the UK construction PMI joined by the first glimpse at the Eurozone’s Q1 growth.

Spreadex Analyst, Connor Campbell suggested – “current estimates have the reading hitting an 8 month nadir of 52.1, a slight decline from the 52.2 revealed last month. However, after yesterday’s UK manufacturing PMI left analysts looking a bit silly, avoiding the predicted 5 month low to instead hit a 3 – and a bit – year high, investors will be hoping for a similar disconnect between expectation and reality this time around.”

With the majority of commodity stocks in the red, and notable declines for ITV and Sainsbury’s, the FTSE fell 0.2% after the bell. The pound, meanwhile, was similarly uninspired, slipping 0.1% against the dollar – but remaining above 1.29 – and sitting flat against the euro.

Connor Campbell added – “Sterling’s sluggishness, especially against the greenback, is likely explained by the fact that this evening sees the latest Federal Reserve meeting, one that could potentially tee-up a June rate hike. The DAX and CAC matched the FTSE’s slow start this Wednesday, the German and French indices falling 0.1% and 0.2% respectively. That inertia is partly informed by investors waiting for the region’s first quarter GDP reading – which is forecast to rise to 0.5% from Q4’s 0.4% – before making any significant moves.”

US earnings results today include Garmin, Time Warner, Reynolds American, YuM! Brands, Kraft Heinz, AIG, Transocean, MetLife and Facebook.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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