The FTSE 100’s 30-point bounce today is at odds with a more-muted session on Wall Street. 

European markets have held their ground while Wall Street continues to struggle, picking up a theme from last Friday. No doubt the early signs of pre-FOMC hesitancy detected on Friday will only get stronger now that the decision and press conference are just over 48 hours away. In one sense, barring something radical, the outlook is quite tough either way for US stocks. No change and Wall Street will be left waiting for the next earnings season to start, but if the Fed talks about an earlier tapering then thin summer markets might be ripe for a bigger pullback. The inflation story gets another boost tomorrow with PPI readings, so that might help provide some distraction while investors wait for Jerome Powell, but stock markets overall continue to look in vain for a catalyst to resume their upward move. Early gains today were sold, suggesting that a broad atmosphere of caution continues to hang over equities. 

Oil’s resilience in the face of warming US-Iran relations suggests that the supply dynamic continues to play second-fiddle to the expectation that demand will keep building into the second half of the year. Growth forecasts have remained stable, and traffic levels continue their recovery to, or in some cases above, pre-Covid levels. And while inflation concerns bother some, stripping out energy and food in core CPI means that so far the rise does not appear to be perturbing monetary and fiscal policymakers. 

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