OIL
Brent oil prices fell below $73 per barrel during early Wednesday trading, carrying the momentum of the previous session and increasing losses to more than 10% this month. The price of the barrel has been in decline, weighed on by worries over future demand. This sentiment was exacerbated by yesterday’s release of US inflation figures, which remained above the ideal levels and made it more likely for the Federal Reserve to keep interest rates higher for longer, with oil consumption likely to suffer as a consequence. Against this background, today’s Fed monetary policy decision may lead to further losses if the central bank insists on adopting a hawkish stance, talking down the chances of a rate cut within the next six months.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
European shares traded sideways on Wednesday as investors held their breath ahead of the last FOMC meeting of the year.
The STOXX-50 index still trades inside its narrow range between 4,5330.0pts and 4,550.0pts, with patchy performances across all sectors. At the same time, investors await further monetary developments following yesterday's US inflation reading that took some by surprise.
While the YoY US CPI data came out at 3.1%, just as expected, investors were disappointed to see a 0.1% increase compared to November, which had an immediate bullish impact on the US dollar, undermining hopes of a quick dovish switch from the Fed.
That is why today's FOMC meeting will be crucial and probably shape market sentiment for the rest of the year. Investors, supported by cooling inflation over the last few months, have already largely priced in a monetary dovish turn from the Fed. This puts them at risk as Fed Chairman Jerome Powell may choose to temper strong dovish expectations, keeping the doors open for the "higher for longer" narrative, especially following yesterday's CPI report.
If that happens, a sharp downside price action could quickly occur on equities, likely driving benchmarks towards a correction zone before the year's end.
On the other hand, no significant hints from today's meeting could keep the current status quo alive on stocks, while of course, any dovish semantic should fuel market sentiment and drive share markets to new highs.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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