The two-day meeting of the US Federal Reserve will dominate markets this week – even though our market will be up a tidy 40 points or more this morning after a solid close on Wall Street and the futures market.
For the week, US shares rose 1.1%, eurozone shares were up 1% and Australian shares gained 1.5% (less than the 4.3% jump the week before). But Japanese shares lost 0.5% and Chinese shares fell 2.2%.
Other central banks meet and will release reports (see the Diary) this week, but none will have the impact of what the Fed says and forecasts early Thursday morning, our time.
Another slide in iron ore prices on Friday night won’t have much of an impact here today with the market bulls in full charge, while higher oil prices won’t have a great impact either.
Global investors are back in a ‘risk on’ mode, hence the strong performance of the Aussie dollar which hit an eight month high Friday night of 75.85 US cents and closed at 75.65 – up from 74.40 US cents the previous Saturday morning.
The currency jumped in the wake of the move by the European Central Bank to expand its quantitative easing and pushed its deposit rate down to minus 0.40%.
This week though the dollar (and other markets) could be hit by the results of the Fed meeting.
The fallout from whatever statement is issued early Thursday morning, our time, is uncertain, but any signal that the Fed is back to looking at rate rises later this year could very well see the US currency firm and the Aussie dollar sell-off.
So watch for markets to hit the go slow button Tuesday and Wednesday ahead of the Fed meeting and subsequent statements.
The Bank of Japan makes its statement tomorrow afternoon, and nothing as significant as the January 29 shock to move to negative interest rates.
This meeting will also see latest economic forecasts from the central bank and the so-called dot plot which shows where the members of the Fed see interest rates over the next couple of years. That is now seen as the best guide to the thinking of the Fed on rates.
Meanwhile markets hit 2016 highs on Friday on Wall Street, but ended more sedately elsewhere.
The S&P 500 and Dow industrials rose sharply on Friday night to end the week at their 2016 highs on Friday.
All three of Wall Street’s main indexes posted their fourth straight weekly gain in a rally mostly fuelled by the continuing rebound in oil prices.
The S&P 500 rose 32.62 points, or 1.6%, to 2,022.19 for a 1.1% gain over the week.
The Dow jumped 218.18 points, or 1.3%, to end at 17,213.31 and was also up 1.1% over the week.
And the Nasdaq Composite rose 86.31 points, or 1.9%, to 4,748.47 and added 0.7% over the week.
In Europe shares rose on Friday and over the week with the Stoxx 600 index up 2.6% on Friday and 0.1% for the week – its 4th weekly gain in a row.
European stocks rallied and some Asian markets rose on Friday and over the week.
In Australia, the ASX200 index rose 0.3% on Friday and 1.5% for the week to end at 5166.4.
The All Ordinaries gained 0.3% on Friday and 1.4%, ending on 5224.8.
