Market commentary: All eyes on the Fed

After spending much of the day in the red, European stock markets closed in positive territory, while Asian equities recovered some of yesterday’s losses. All major European stocks, including the FTSE, the DAX and the CAC 40 ended the day trading higher at 1.33%, 0.54% and 0.56%, respectively.

The other major news of the day saw Toyota crowned the world’s largest car company, ahead of Volkswagen. The German company had overtaken Toyota last year before the emissions scandal went public.

US stocks stumbled on Wednesday, amid a drop in oil prices, and a shaky forecast from Apple took tech stocks lower. Disappointing outlooks from aircraft makers caused a hit on industrial stocks.

Wednesday evening was an important day for the world of finance, as all eyes were on the US Federal Reserve, which was holding its first meeting of the year. Since the Fed regulates America’s financial institutions, and thereby watches over the world’s largest economy, this makes it one of the most powerful organisations on earth.

Speculation has been rife all week on whether or not the bank of the US government would hike rates. The last time the Fed hiked rates last month, officials pointed to four more rate hikes in 2016.

When the Fed hikes rates, it’s their way of saying that the economy is strong and healthy. When it lowers rates or changes it forecast, this shows weakness and a lack of confidence in the US economy.

Since hiking rates from record lows in December, the global economic outlook has fallen sharply. Stock markets and oil prices have plummeted, and China’s economic stability has been nothing short of weak. Therefore, many people wonder whether it was a mistake for the Fed to act as it did.

JP Morgan Investment Strategist, Philip Guarco, led the way with speculation through his statement that “The Federal Reserve must seize the opportunity on Wednesday to reconcile the difference between its past statements and the market's expectation about where interest rates will be by year's end.”

The Fed has more power and influence on financial markets than any other legislative entity. Its monetary decisions are intensely observed and often lead the way for other countries to take on similar policy changes.

Chairwoman Janet Yellen isn’t scheduled to hold a press conference and officials won’t release updated economic projections until March – further emphasising that the vibe prior to the meeting is that an adjustment to interest rates in extremely unlikely.

However, nothing is certain till the fat lady sings. During the meeting, the decision was made to keep interest rates unchanged, however the FED said it will ‘’closely monitor global economic and financial developments.

This article was issued by Rebecca Naudi, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.