Markets get jittery whenever the Federal Reserve is due to speak or issue important information.
With the central bank set to publish the minutes from its November meeting tomorrow, equity investors need to brace themselves for the Fed to say it is likely to keep raising rates to tame inflation, even though October’s consumer prices figure was below expectations.
Russ Mould, investment director at AJ Bell, said: “Investors may have got carried away by the recent inflation surprise which triggered a rally in stocks around the world. Tomorrow could feel like a bucket of cold water has been poured on this rally.
“The Nasdaq fell 1.1% last night while the S&P 500 reversed 0.4%. It might take a dovish surprise in the Fed minutes for markets to pick up again and that seems highly unlikely given recent hawkish comments from James Bullard, president of the St Louis branch of the Federal Reserve. Last week he said the Fed’s main policy rate could increase to between 5% and 5.25%, which is above many people’s expectations.
“While US stocks were looking fragile ahead of this event, the FTSE 100 pushed ahead thanks to strength in energy and mining stocks. Brent crude jumped nearly 1% to $88.44 per barrel, prompting investors to pile into oil producers.
“Metal producers bounced back after yesterday’s slump caused by a new Covid outbreak in China, which caused investors to worry that would translate into reduced commodities demand. That concern is still valid and markets will be closely watching how China deals with this latest flare-up in Covid.”