Fed rate concerns dampen market sentiment

Markets remain concerned that recent data will bring higher rates, although optimisms can look towards the natural gas price as a signal of impending downside for inflation, says Joshua Mahony, senior market analyst at online trading platform IG.

Market concerns continue as the Fed hikes look set to continue 

“Equities look to be heading into the weekend on a largely downbeat tone, with recent concerns over slowing US disinflation shifting rate expectations. While most had seen the Federal Reserve soon ending their tightening phase after a historic surge in rates, the higher-than-expected retail sales, payrolls, and inflation figures provide the basis for yet more monetary tightening from the Fed. Bowman provided yet another reminder that the recent market exuberance may be somewhat misplaced for now, with the Fed member citing the need to continue raising rates until we see more progress. With markets now pricing in another 25bp hike at each of the next three FOMC meetings, investors have begun scaling back their exposure in anticipation of a potential market pullback.”

Natural gas slump should soon drive inflation lower

“Energy prices are under pressure once again today, with Natural gas hitting a fresh wo-year low despite what the energy firms might have you believe. While both European and US inflation continue to move lower, housing costs remain a thorn in the side of the central banks. The exorbitant rise in energy prices for households and businesses alike remains a key component that is yet to reverse despite the collapse in natural gas over recent months. While it may take some time for energy firms to roll onto new contracts, the fact that European gas prices are now 85% below their August peak provides a major drag on inflation once that is finally passed on to the consumer. ”