Global sell off in equities resumes on hawkish Fed Powell

Fears over rising interest rates following Fed Powell’s first congressional testimony, sent Wall Street tumbling overnight. Powell’s unequivocal optimism over the outlook for the US economy and his hawkishness have led investors to believe that the Fed could take a more aggressive approach to monetary policy under the watch of Powell. 

Of note Powell comments that he believed the US economy had a stronger start to the year than what he had expected only in December, show that was unfazed by a 10% fall in the equity markets; he is optimism about the US economy and about inflation reaching the 2% central bank target. 

This unequivocal optimum means only one thing to market participants – a more aggressive stance to monetary policy tightening. 

US indices finished on session lows and treasury yields remain elevated at 2.9 which is boosting the dollar in early trade on Wednesday. 

ITV hit by Brexit uncertainties 

Advertising woes have led ITV to fall to the bottom of the FTSE index as investors show their disappointment at the cancelling of the special dividend. ITV’s 6% fall in profits is further evidence of the impact of Brexit, as Brexit uncertainties mean marketing department’s spending has been cut. 

As a result, advertising revenue was down 5% which has dragged heavily on profits at ITV.  

Miners weaker on Soft Chinese data 

Miners were also dominating the lower reaches of the FTSE following metal prices being hit by a double whammy of a stronger dollar and unexpectedly weaker manufacturing data from China, the world’s largest consumer of metals. 

Taylor Wimpey slides 5% 

Taylor Wimpey failed to receive the same uplift to its share price as sector peer Persimmon, on the release of its results. Taylor Wimpey overall produced a reasonable set of figures.

There was some weakness in the order book, which was down a touch from the previous year, and some concerns over outlook uncertainties due to Brexit, whilst the leasehold scandal impacted on profits. 

The shares are down over 5% in early trading, although given the 50% rally since Brexit, these results have provided a good opportunity for investors to book some profits.  

GBP/USD steady ahead o f Brexit Treaty 

Brexit remains firmly in focus with the EU draft on the Brexit treaty expected to ruffle some feathers at Westminster. 

With just three weeks left to agree a transition deal, the treaty from the EU is expected to infuriate the hard line Brexiteers in the Conservative party, which will put more pressure on Theresa May at a critical time. 

 GBP/USD is trading steady at $1.39 ahead of the treaty and ahead of US GDP data due later today. Support still holds around $1.3850, which if broken could see GBP/USD tumble towards $1.3800 before extending losses to $1.3760. On the upside a break above $1.3950 could open the door to the key psychological level of $1.40.