After the excitement of the first two days of the week, a calmer atmosphere prevails today, says Chris Beauchamp, chief market analyst at online trading platform IG.
“Selling across markets seems to have paused for the time being, as investors start to become accustomed to the frequent talk of higher US interest rates.”
Are stocks looking attractive again?
“The weakness in equities seen over the past few weeks certainly disguises the overall strong performance of the global stock market over the past twelve months. At present the losses equities have sustained seem to form part of a normal pullback, and have even yet to reach full ‘correction’ territory. Crucially, the more the Fed talks about higher rates, the more investors will acclimatise themselves to the prospect. While there wasn’t much appetite to chase stocks at the highs of late December, we should not lose sight of the fact that an improving economy will still provide the chance for earnings to grow, and the current reporting season should help remind investors of that fact.”
Higher inflation boosts pound after recent losses
“All the talk might be of what the Fed does next, but we shouldn’t forget that the Bank of England already has raised rates, and looks poised to do so again. Today’s CPI reading justified all those that piled into the rally in GBPUSD over the past month, and even the political troubles animating Westminster do not appear to be having too much of an impact on the pound. The lack of any heir apparent is perhaps the best reason to think that there will be no change in the occupant of No 10 for the time being.”
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