Spreadex Market Update

Europe broadly positive following Fed/Biden, advance US Q1 GDP to come



Reassuring investors that it is nowhere need pulling the plug on its stimulus programme, the Federal Reserve helped lead to a broadly positive European open on Thursday.

Though the Fed acknowledged that the US economy is continuing to recover, while removing the word ‘considerable’ when discussing the risks posed by the pandemic, Jerome Powell and co. were keen to stress that ‘substantial further progress’ needs to be made regarding full employment and the 2% inflation target before the taps are turned off.

On inflation, the Fed was sanguine, once again insisting that the current gains are related to ‘transitory factors’.

One potential issue, however, and a contributary reason to the Dow Jones’ losses last night, is that Powell said that he wanted to see a ‘string’ of strong jobs reports before discussing tapering. When pushed, he defined a string as more than one, meaning tapering talk could arise in June dependent on the next couple of nonfarm payrolls.

Markets are also benefiting from Joe Biden’s latest stimulus proposal, this time the $1.8 trillion American Families Plan. Investors seem non-plussed that the plan also involves a capital gains tax hike.

Benefiting from rising commodities in the face of a weakened dollar, the FTSE added a further 0.4% after the bell, leaving it a point or two away from 7,000. The CAC also had a strong start, building towards 6,300 with a 0.6% increase. The one major European outlier was the DAX, which fell back under 15,300 as it dropped 0.2%.

And after falling 150 points last night, the Dow is now heading for a 110-point push when trading starts Stateside.

There’s a rather large asterisk next to those potential gains, however, in the shape of the pre-open advance Q1 GDP reading. Luckily, it is set to provide evidence of the economic recovery the Fed spoke of last night, with analysts forecasting 6.1% at the annualised rate, compared to 4.3% in Q4.

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