US markets expected to pull back following recent strength;
G20 meeting bring questions on European and Japanese growth;
FOMC back in focus as Dudley speaks in New York.
A weak open to the European markets has followed on from what is a pretty disappointing start to the week with the Japanese Nikkei, Hang Seng and Shanghai composite all posting significant falls to start the week. The US markets are expecting a very similar mood, where futures point towards the S&P500 opening -8 points lower, Nasdaq -21 points and DJIA -30 points.
Friday’s Alibaba driven excitement came off the back of a strong Scottish referendum result which provided a definitive conclusion to an event which provided significant degree of uncertainty within the markets. With new alltime highs recorded in the S&P500 last week, it comes as no surprise that we are seeing an element of profit taking come into the market, which has also been seen in the USDJPY currency pair following the strongest period of upside since January 2013.
This indecision within the markets today was always likely given the relatively quiet day ahead. Over the weekend, the G20 finance ministers meeting hosted in Cairns provided a reminder of where the global recovery currently stands, with the Eurozone and Japan being singled out as particularly dragging upon G20 growth. However, for the most part this has been highlighted as possibly being achieved through fiscal infrastructure investment as opposed to monetary policy per se.
In the US session, the focus will largely be geared towards the release of existing home sales data, due out soon after the markets open. This is accompanied by a speech from FOMC member William Dudley in New York. At a mixed FOMC meeting, the markets saw Janet Yellen somehow bring about both a more bullish and bearish outlook, thus pushing the emphasis of providing more clarity upon the other members of the Fed committee. With a tighter timeline for rate hikes, set against a continued hold-off on providing a start date for the first rate hike, it will be interesting to see if Dudley can provide any clarity on either points.
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