Fed expected to leave rates unchanged - 27.4.2016

US stocks edged higher on Tuesday as investors refrained from making big bets ahead of Federal Reserve decision while oil rallied. The dollar weakened with unexpected low durable goods order data indicating lower business investment, which weighed on US economic growth outlook. According to live dollar index data the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, slipped 0.3% to 94.564. The Federal Reserve is expected to leave rates unchanged at the conclusion of its April policy meeting, but investors are more anxious to see policy makers’ assessment of US economic growth prospects and a guidance how many rate hikes the central bank is projecting for this year. The dollar has been weakening since the beginning of this year after the Fed lowered the pace of interest rate hikes to two from four indicated in December projections. March statement cited downside risks for US economy from slowing growth abroad and turmoil in financial markets. Recently several Fed policy makers have mentioned that markets are underestimating the pace of interest rate hikes, pointing to likelihood of a more hawkish statement by the Fed than expected.

The Dow Jones Industrial Average edged up 0.1% settling at 17990.32. The S&P 500 closed 0.2% higher at 2091.7 led by the energy sector, up 1.4%. The Nasdaq Composite dropped 0.2% as large technology stocks slipped ahead of Apple’s earnings report. Apple slipped for a fourth session in a row, closing down 0.7% as the company was expected to report its first year-over-year drop in iPhone sales. Facebook, Comcast, Boeing will report quarterly earnings today. At 13:00 CET Mortgage Applications will be released by the Mortgage Bankers’ Associations. At 14:30 March advance Goods Trade Balance will be published. The tentative outlook is positive. At 16:00 CET March Pending Home Sales will be released. The tentative outlook is positive. And at 20:00 CET Federal Open Market Committee Rate Decision will be released.

European stocks rose on Tuesday as investor confidence was bolstered by positive corporate reports. The euro strengthened against the dollar. The Stoxx Europe 600 edged up 0.2%. The market sentiment was buoyed particularly by 4.3% gain in BP shares on better than expected earnings report. Shares of Orange advanced 1.3% after the telecom company reported 3.5% rise in revenues. In country indexes Germany’s DAX 30 edged lower 0.3% to 10259.59, France’s CAC 40 index also lost 0.3% while UK’s FTSE 100 index gained 0.4%. Today at 10:30 CET first quarter preliminary GDP will be released in UK. The tentative outlook is negative.

Asian stocks are falling today as investors remained cautious ahead of Federal Reserve and Bank of Japan policy decisions despite positive data from China: profits earned by Chinese industrial companies rose 11.1% in March from a year earlier. Nikkei declined 0.4% today on disappointing corporate reports with yen edging higher against the dollar.

Oil futures prices are rising today on strong investment sentiment and weaker dollar. June West Texas Intermediate crude rose 3.3% to $44.04 a barrel on the New York Mercantile Exchange on Tuesday, the highest settlement of the year for a front-month contract. Trader optimism was supported also by an 11% upward revision of crude-oil prices to average $41 a barrel this year by the World Bank. The World Bank forecast is an average of Brent, West Texas Intermediate and Dubai crude oil prices. Today at 16:30 CET US Crude Oil Inventories will be released by the Energy Information Agency. US crude oil stockpiles are expected to fall after industry group American Petroleum Institute reported yesterday a surprise decline of nearly 1.1 million barrels in US crude inventories last week.

Gold is extending gains today after gold for June delivery gained 0.3% to $1243.40 an ounce on Tuesday as dollar declined. Copper is retreating after May copper fell 0.5% to $2.242 a pound yesterday.