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While you were sleeping: Positioning for the Fed

Thursday 17th March 2016

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Equites moved lower before the end of the US Federal Open Market Committee two-day meeting. 

Fed Chair Janet Yellen is set to hold a closely-watched press conference after the meeting at which policy makers are expected to hold the central bank’s benchmark interest rate steady.

“The centre of the committee will likely recognise that the data do not suggest any material slowdown in the US economy and that financial markets have stabilised, at least for now,” Roberto Perli, an analyst with New York-based Cornerstone Macro, told Reuters. “The best course of action in this situation is to leave rate hikes on the table at the next couple of meetings.”

The latest US inflation data revealed a larger than expected gain. A Labor Department showed the consumer price index, excluding food and energy, rose 0.3 percent in February, following after a similar increase in January.

“The Fed could easily signal that rate hikes are coming, possibly sooner than most think,” Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania, told Reuters. “Today's numbers, especially the inflation report, is a warning that the days of no price pressures are behind us.”

A Commerce Department report showed housing starts climbed 5.2 percent to a seasonally adjusted annual pace of 1.18 million units in February, a five-month high.

Wall Street slipped. In 1.16pm New York trading, the Dow Jones Industrial Average fell 0.2 percent, while the Nasdaq Composite Index decreased 0.1 percent. In 1.02pm trading, the Standard & Poor’s 500 Index slipped 0.1 percent.

The Dow declined as slides in shares of Pfizer and those of Merck, last down 1.8 percent and 1.5 percent respectively, outweighed gains in shares of Apple and those of United Technologies, last up 0.9 percent and 0.6 percent respectively.

In Europe, the Stoxx 600 Index ended the day with a gain of nearly 0.1 percent from the previous close. Germany’s DAX Index added 0.5 percent, while the UK’s FTSE 100 Index rose 0.6 percent. France’s CAC 40 Index fell 0.2 percent.

Oil prices rallied after major oil producers geared up for a meeting in Qatar next month to discuss plans to freeze production.

Qatari Oil Minister Mohammed Bin Saleh Al-Sada said producers from within and outside the Organisation of the Petroleum Exporting Countries will meet in Doha on April 17 to discuss output freeze plans, according to Reuters.

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