Indices have suffered heavy losses this morning, continuing their retreat from recent highs, as risk aversion build across markets.

  • Powell commits the Fed to long-term action
  • Indices continue to give back recent gains
  • FTSE 100 stocks broadly in the red

Stock markets remain deep in the red, and a cursory glance at market reaction to last night’s Fed would suggest that Powell was a major disappointment for investors. That is not really fair, however, since the Fed’s commitment to long-term support for the US economy is now stronger than ever. Quite apart from leaving rates in deep freeze for the next two years (at least), the clear message has been that the world’s most-powerful central bank is committed to repairing the damage to the US economy wrought by Covid-19, regardless of what markets do. Investors underestimate the Fed at their peril. But perhaps the lack of any fresh action meant that a short-term drop in stocks was all but guaranteed – the big question will be whether the 1000-point fall in the Dow this week will end up the previous ones since March, and simply provide investors with the chance to renew their commitment to this equity rally.

A weaker dollar has bolstered gold prices, which have enjoyed a rally as risk appetite for equities wanes, and with silver on the up for now too the FTSE 100’s few gainers are precious metal stocks. Aside from this, the index remains broadly in the red, although the moves have not been driven by any real news but more thanks to a resurgence in volatility that serves as a reminder that we are not back to the pre-February normal, whatever the price action in certain unstoppable US stocks might seem to suggest.

Ahead of the open, we expect the Dow to start at 26,332, down 657 points from Wednesday’s close.

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