Markets mixed after Fed statement - 29.1.2015

US stocks fell sharply on Wednesday after Federal Reserve reiterated its plans to hike interest rates sometime in 2015. The Federal Reserve boosted its assessment of US economy as it described the expansion as “solid”, an improvement over the "moderate: performance it saw in December, and repeated a pledge to stay "patient" on raising interest rates. The Fed statement put less emphasis on inflation outlook by dropping a clause from its December statement that the assurance of patience was consistent with a previous pledge to hold rates low for a "considerable time," especially if "projected inflation continues to run below" the 2 percent target. Investors took the statement as hawkish, which led to dollar appreciation. Resumed slide in oil prices also weighed on investors’ confidence which led to market sell-off with energy sector falling 3.9%. Today earnings reports from Google, Alibaba, Amazon.com and Ford will be published. At 14:30 CET the Initial Jobless Claims for week ended January 24 and Continuing Claims for week ended January 17 will be released in US. The tentative outlook is positive for US dollar as jobless claims are expected to fall, and a bigger than expected reduction in initial claims may further strengthen the US dollar. And at 16:30 CET Pending Home Sales will be released in US.

European stocks recorded marginal gains on Wednesday on the backdrop of mixed batch of corporate earnings reports and increased investors’ concern over plans of newly elected Greek government to seek debt relief from its international creditors. The Tsipras administration also announced plans to freeze privatization plans agreed upon as part of the country’s bailout program. The results of GfK market research’s survey indicated consumer confidence in Germany will rise in February. Euro weakened against dollar after the Federal Reserve’s policy statement. Today at 09:55 CET German Unemployment Change and Unemployment Rate in January will be released, the outlook is positive for euro. At 11:00 CET January euro-zone business and consumer sentiment data will be released. The forecast is mixed, with euro-zone Industrial Confidence Index expected to fall while Economic Confidence Index is forecast to record a marginal gain. At 14:00 CET the preliminary EU Harmonized Germany inflation data for January will be released. The tentative outlook is negative for euro as both monthly and annual inflation rates are expected to come out negative.

Nikkei is falling today after closing at one-month high on Wednesday. The construction equipment makers are leading the losses. A batch of economic data were published today in Japan. The retail sales unexpectedly fell in December for a third straight month.

Oil fell on Wednesday after a larger-than-expected increase in US crude inventories. The increasing US crude inventories were accompanied with increased US output, which accelerated by 27,000 barrels a day to 9.21 million, according to the Energy Information Administration. As there are no signs that major producers are taking measures to curb output to stem global supply glut the outlook for oil is bearish for near term.

Wheat is another commodity that is falling as a result of global output surge. While US harvests were the smallest in three years, bigger harvests from other major overseas producers like Argentina, Russia and the rest of Europe sent global output to a record. Analysts from Societe Generale SA expect the prices to continue to fall till the end of March.