Equity Analysis and News
- Dow Jones | Coronavirus Latest Shrugged Off, Investors on Fed Watch
- FTSE 100 | Bank of England to Refrain from Cutting Interest Rates
Source: Thomson Reuters, DailyFX
Dow Jones | Coronavirus Latest Shrugged Off, Investors on Fed Watch
The Dow Jones remains elevated as tech and defensive sectors underpin the index. However, we see caution in chasing the market higher amid rising risks of a potential correction. Unlike the Chinese stock market (Hang Seng & Shanghai Composite), the latest concerns surrounding the Coronavirus outbreak has been shrugged off thus far by US indices. However, with reports suggesting that cases are arising in the US, this may provide an opportune moment for bulls to head for the exit.
That said, among the main focal points next week will be the Federal Reserve meeting on Wednesday, with attention particularly being placed on rhetoric around the balance sheet. Recently, Fed’s Kaplan had warned that injections of liquidity is fueling risk taking, which is echoed by the graph below. As such, while unlikely at this point, potential commentary surrounding a possible wind down in balance sheet growth would be negative for risk sentiment.
Elsewhere, index heavyweights Apple (Jan 28th) and Boeing (Jan 29th) will be providing their latest financial figures, where the latter remains pressured by the ongoing issues pertaining to the Max 737 model.
Dow Jones Price Chart: Daily Time Frame
Source: IG Charts
FTSE 100 | Bank of England to Refrain from Cutting Interest Rates
A stellar UK Markit PMI report, which echoed the post-election rebound in sentiment survey’s (CBI) earlier in the week, should see the Bank of England refrain from lowering interest rates at the January 30th meeting. As it stands, money markets continue to imply that the decision is a coin-toss, however, we stick with our view that the BoE will remain on hold with a 6-3 vote split, while signaling a more cautious outlook. Therefore, keeping the FTSE 100 capped on the upside, while the descending trendline from the record high remains firm.
FTSE 100 Price Chart: Daily Time Frame
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— Written by Justin McQueen, Market Analyst
Follow Justin on Twitter @JMcQueenFX