Like gold and other markets, shares will be driven by sentiment about the Fed’s expected easing.
In fact, unlike the performance of gold and silver last week, equities markets seemingly had few worries about the Fed’s impending decision.
Good Chinese economic data for August and an easing in tensions over Syria helped push markets higher and weaken commodities ahead of the Fed meeting, which added its own pressures on gold, oil, copper and sliver.
US shares rose by around 1.7% to 3%, Eurozone shares gained 2.3%, Japanese shares rose 3.9%, Chinese shares gained 4.5% and Australian shares rose a more modest 1.5%.
The election result had little impact.
Bond yields were mixed to stronger with the yield on the key US 10 year security falling from around 2.95% last Monday to 2.89% on Friday as nervy investors parked funds in safe havens ahead of the Fed’s move.
And, commodity prices mostly fell ahead of the Fed’s taper decision despite stronger Chinese data. Oil fell 2.1% and copper was off 1.7%.
Currencies were mixed as well and the Aussie dollar ended around 92.45 USc, well under the 93 USc mark reached ahead of last Thursday’s jobs report, but well ahead of the 91.85c it closed at the previous week.
Our market should open slightly higher this morning after a small rise on the share price futures contract on Saturday morning.
Wall Street showed it wasn’t really concerned about the Fed, despite the caution shown by bond investors.
S&P 500 YTD – Wall Street should take the Fed’s move in its stride this time
The Dow was up 75.42 points, or 0.5% at 15,376.06; the Standard & Poor’s 500 Index was up 4.57 points, or 0.27% at 1,687.99 and the Nasdaq Composite Index was up 6.22 points, or 0.17% at 3,722.18.
For the week, the Dow was up 3%, the S&P 500 was up 2% (its best weekly gain for two months) and Nasdaq rose 1.7% (with the weakness in the Apple share price cutting gains).
The Australian market fell on Friday and the ASX200 index was down 23 points at 5,219 and the the All Ordinaries index was down 23.5 points at 5,214.7. That still left the market 1.5% higher.
This week will see much more volatile conditions as the Fed decision is revealed, but unlike earlier in the year when the idea of tapering the easing spending was first mooted, this time should see a far more relaxed reaction from investors and markets generally.
A point to keep in mind is the value of the Aussie dollar which is showing a reluctance to fall to levels that would make the RBA and exporters happy.
The release tomorrow of the September board meeting of the RBA will be a short term driver of the dollar’s value as investors realise the central bank no longer has a bias to ease interest rates further.
