Thursday, 21 February 2019

Markets rise as investors doubt further Fed rate hikes

Markets rose on Wednesday. The S&P 500 rose 0.2 percent and the STOXX Europe 600 rose 0.7 percent.

Investors were encouraged by the minutes of the January Federal Reserve monetary policy meeting released on Wednesday, which showed that Fed officials were divided over future interest rate hikes.

Paul Ashworth, chief US economist at Capital Economics, said that “we now expect the Fed to leave rates unchanged throughout this year, before a further deterioration in economic growth forces it to cut rates by a total of 75 basis points in 2020”.

Meanwhile, there were no new developments on the US-China trade negotiations, but Neil Dutta, head of economics at Renaissance Macro Research, thinks that a deal could drive stocks up further.

Dutta estimated that “trade tensions have shaved a cumulative total of 300 points off the S&P 500” and that “if not for all the negative trade news over the last 14 months, the S&P 500 would be about 11% higher”.

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