Mining stocks are helping to lift the FTSE, with a raft of disappointing US data driving the dollar lower and commodities higher.
- Markets on the despite underwhelming US data
- US GDP release a damp squib, with the FOMC likely to take note
- US infrastructure plans help lift commodity prices
Bad news is good news for investors today, with a raft of underwhelming data out of the US allaying concerns over a tightening of the monetary tap at the Federal Reserve. Yesterday’s FOMC meeting largely delivered a message for both sides, with Powell’s plans to hold off on tapering talk undermined by the economic improvements which point in that direction. Nonetheless, that economic recovery touted by Jerome Powell looks to be on unstable ground, with a second-quarter GDP reading of 6.5% falling well short of the 8.5% widely expected. The pressing issue for Joe Biden and Janet Yellen will be to address inventory issues, with businesses unable to keep up with demand thanks to employee and business bottlenecks. Nonetheless, while some companies struggled to take advantage of demand due to inventory issues, resolution of this could lead to an upward Q2 revision or stronger Q3 ahead. While the disappointing GDP and jobless claims data may cause many to believe the Fed will remain hesitant, a jump in the core PCE inflation figure to 6.1% highlights the continued price squeeze in the US.
Mining stocks are on the front foot today, as a breakthrough in talks over a bipartisan infrastructure bill made a deal increasingly likely. Tesla is one of the most notable gainers today, despite a huge 90% cut in spending apportioned to electric vehicle adoption under the revised bill. Nonetheless, with the government looking to spend $1 trillion under the proposals, mining firms have grounds for optimism as they forecast a rapid rise in US demand for raw materials. Meanwhile, with the dollar weakening off the back of a hesitant FOMC and disappointing data, it comes as no surprise to see commodities gaining across the board.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.