Markets firm ahead of Federal Reserve decision

US stocks extended gains for the second session on Tuesday as a rebound in oil prices bolstered investor optimism. The dollar strengthened ahead of Federal Reserve’s interest rate decision today. Live dollar index data indicate the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.6% to 98.220. The S&P 500 rallied 1.1% as all 10 major sectors closed in the black, led by the energy sector’s 2.9% gain. The Dow Jones Industrial Average rose 0.9%. Investors have priced in a 81% likelihood that the Federal Reserve will hike interest rates 0.25% at the end of its two-day meeting today and the focus now is on the interest rate path next year. Market participants don’t exclude a dovish statement by the Federal Reserve indicating a slow pace of rate increase next year as policy makers have mentioned previously the pace of rate increase will be gradual. In economic news Bureau of Labor Statistics reported consumer-price index was unchanged in November as falling energy and food prices depressed consumer prices, though core prices which exclude volatile energy and food prices rose 0.2% for the third straight month and gained 2% year-over-year. Home-builder confidence slipped in December to 61 from 62, the second monthly fall, according to data released by the National Association of Home Builders. Today at 13:00 CET Mortgage Applications will be released in US. At 14:30 CET November Housing Starts and Building Permits will be published. While the Housing Starts are expected to rise, the Building Permits are forecast to fall. At 15:15 CET November Industrial Production will be released. The tentative outlook is positive. At 15:45 CET November preliminary Manufacturing PMI will be published by Markit. And at 20:00 CET Federal Reserve Interest Rate Decision will be announced followed by Janet Yellen’s press conference in half an hour.
European stocks rebounded on Tuesday after a jump in energy shares lifted main stock market indexes The euro weakened against the dollar. The Stoxx Europe 600 rose 2.9%, Germany’s DAX 30 jumped 3.1%. Energy shares led the gains with oil producers Tullow Oil and OMV AG jumping 5.1%, and offshore driller Seadrill Ltd. rallying 5.4%. The closely watched ZEW survey of analysts and institutional investors indicated German economic sentiment continued to improve in December. Today at 11:00 CET euro-zone final Consumer Price Index for November and October Trade Balance will be released. The tentative outlook is positive for euro.
Nikkei closed 2.6% higher today recording the biggest gain in two-and-half months as investor sentiment was supported by gains in US stock market and yen weakened against the dollar ahead of Federal Reserve interest rate decision.
Oil futures prices are lower today on American Petroleum Institute’s estimates US crude stockpiles likely grew by 2.3 million barrels last week. Prices rebounded on Tuesday on survey results by pricing agency Platts indicating a 2.5 million barrel weekly decline in crude stocks. January WTI futures rose 2.9% to $37.35 a barrel yesterday, and January Brent crude gained 1.4% to $38.45 a barrel on London’s ICE Futures exchange. Official data on US Crude Oil Inventories will be released today at 16:30 CET by Energy Information Administration.
Gold prices are edging up today with spot gold up at $1065.38 an ounce after sliding for two days on stronger dollar and prospects of higher interest rates.