Thursday, 20 June 2019

Markets rise as Fed prepares for rate cut, Japanese exports plunge

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.3 percent and the Nikkei 225 surged 1.7 percent. However, the STOXX Europe 600 was flat.

US stocks were boosted by the Federal Reserve's statement after its monetary policy meeting on Wednesday. “The FOMC will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion,” the Fed said in its statement, removing its recent reference to being “patient”.

The Fed also said inflationary pressures have receded, lowering its forecast for PCE inflation in 2019 to 1.5 percent from 1.8 percent, below its 2 percent target.

Kevin Giddis, head of fixed-income capital markets at Raymond James, said that now that the Fed “finally realize that they are not going to see inflation”, a rate cut could come “as early as July”.

However, Mike Loewengart, vice president of investment strategy at E-Trade Financial, said: “Investors would be well served to recognize that a rate cut is not a foregone conclusion, especially given the Fed has limited ammunition in its traditional tools of monetary policy, most notably the federal-funds rates.”

Meanwhile, elsewhere, a report on Wednesday showed that Japan's exports fell 7.8 percent in May from a year earlier, its sixth consecutive declinue.

“For the Bank of Japan and for policymakers, the message is very, very clear: the industrial part of the Japanese economy is in recession, ” said Jesper Koll, senior adviser at WisdomTree Investments.

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