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Stocks Continue in Post-Fed Glow

Roaring 20s it is Then...

Stocks continue their exuberant post-Fed rally with slightly more circumspect gains into the weekend. Shares in Europe pared some very hefty gains into the close on Thursday and are a little firmer this morning. FTSE 100 rose 1.2% on Thursday, whilst European shares were broadly 0.9% higher. US stocks, which had put on a real show on Wednesday after the Fed, delivered more modest gains in the next session, with the S&P 500 up a quarter of one percent, and now sits about 1.5% from its record.

Market Moves

The Dow added 0.43% to move further into record territory. Asian stocks broadly followed higher. The US 10yr fell below 3.9% at one point and closed at its lowest since July, pushing the dollar to a fresh 4-and-a-half month low. Gold rallied towards $2,050 on the weaker Treasury yields and dollar flow, whilst crude is on course for its first weekly rally in two months.

Following the Fed, the Bank of England and European Central Bank were a bit more cautious.

BoE

The Bank of England voted 6-3 to keep rates on hold at 5.25%and left the language on the likely path ahead unchanged. Most MPC members thought it’s too early to conclude services inflation or pay growth is on a sufficiently downward trend. And the Bank stuck with a more decisive tightening bias than the Fed, leaving in the statement that “further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures”. Gilt yields firmed up notably off multi-month lows and sterling posted further gains.

Forex Frenzy

GBPUSD advanced towards 1.28 where it retreated a bit overnight and last traded around 1.2750. The euro also rose against the dollar as the ECB remain way more hawkish than the Fed – something rather odd about that when you look at the data...but hey, central bank gods move in mysterious ways.

ECB Policy Holds

The ECB left the policy rates unchanged and the language was also the same as October despite inflation coming down quite a lot in that time. Pointedly, and in sharp contrast to Jay Powell, ECB governor Christine Lagarde said “we did not discuss rate cuts at all." It looks like there is a sense that inflation may tick up early in 2024, which the ECB will prefer ride out first before showing its hand on cuts.

FTSE 100 – clear of the 200-day SMA, ran into stiff resistance at our 38.2 Fib level like clockwork.

200-day SMA

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