Markets on the rise after disappointing GDP release

Joshua Mahony MSTA Scope Markets

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.

Author

Joshua Mahony MSTA

Scope Markets

Joshua Mahony is Chief Markets Analyst at Scope Markets. Joshua has a particular focus on macro-economics and technical analysis, built up over his 11 years of experience as a market analyst across three brokers.

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