Stocks on hold until Feds big decision

The markets are in a holding pattern ahead of the Federal Reserve’s rate decision later today.

Expected rate hike already priced in

Not only is the Fed’s signalled 25 basis points rate hike already well priced into the currency and bond markets, as evidenced by the spike in the US 10-year bond yield to a seven-year high, but the level of the Fed funds rate futures indicate there is an 85% chance of a further rate increase at the end of the year. Although until earlier this week US markets powered to the highest level ever the sentiment is beginning to shift and for the first time in months wariness is creeping in that the high interest rates may start hurting aspects of the US economy, particularly the housing market, and cause the unbridled rally to come to an end.

European shares lacked conviction in any direction trying to balance out the effects of higher oil prices, lower metals and the looming rate decisions except for the French CAC index which started losing ground as French consumer confidence fell to a multi-year low.

FTSE to include Chinese stocks

Asian shares edged higher in a burst of activity before China goes off line for Golden Week next week. The lack of news on the trade war front is in itself good news at present and the focus is shifting onto China’s plans for economic stimulus and the fact that mainland Chinese stocks are due to be imminently included in major global indices. FTSE Russell is expected to make mainland Chinese companies part of its major benchmarks this week after years of resisting the move. Chinese tech stocks in particular have rallied at a phenomenal pace but given how much influence the state still carries in the market have also brought significant volatility and unpredictability. Nevertheless the index decision is likely to attract billions in foreign investment into a market being roughed up by a trade dispute.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.