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Fed caution helps bolster risk appetite 

September 23, 2016

Dave Shellock, Financial Times

The prospect of continued central bank policy accommodation boosted global risk appetite, helping equities maintain their upward momentum and offering support to emerging market currencies and industrial commodities.

The bullish mood in the markets came after the Federal Reserve on Wednesday left interest rates unchanged — while appearing to pave the way for a rise in December — and the Bank of Japan unveiled adjustments to its policy aimed at steepening the yield curve.

Indeed, at one stage on Thursday the S&P 500 equity index reached 2,179.99 — less than 0.5 per cent below the record closing high of 2,190.15 it set in mid-August — before easing back to 2,177 by the end of trade, still up 0.6 per cent on the day, and higher for the month.

The CBOE Vix volatility index was down more than 10 per cent in late trade and below 12, the lowest for two weeks.

“The Fed noted that the case for higher rates had strengthened and three district Fed presidents dissented in favour of a rate hike; this was the virtual definition of a ‘hawkish hold’,” said Shaun Osborne, strategist at Scotiabank. Read more

 
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