Spreadex Market Update
Far better than expected US Q4 GDP data can’t save Dow from rate-hike eyeing stronger dollar this Friday
Dismissing fears of a US recession the latest fourth quarter GDP reading came in at an annualised 1.0%, a marked improvement on both the 0.4% downward revision forecast and the 0.7% initially predicted. It does still signify, however, a notable slowdown as the US economy wrapped up 2015, halving the third quarter’s 2.0% (and nearly a quarter of the 3.9% growth seen in Q2). That GDP surprise was joined by improvements in personal spending and income, the revised UoM consumer sentiment figure and the core PCE price index (which, at 0.3%, hit its highest level since mid-2011); the only negative this afternoon was an unexpectedly widened goods trade deficit, at $62.2 billion against the $61.1 billion expected.
Yet the Dow Jones, after surging around 120 points at the open, soon lost its lustre, perhaps due to the strong core PCE price index figure. The number is the Fed’s preferred method of measuring inflation, and such a high reading potentially (if, realistically, not really) puts a slight March rate hike back on the agenda. The subsequent surge from dollar (sending the poor pound back to the 7 year lows it had begun to escape whilst taking nearly a percent off the euro) suggests as much, the greenback’s gains to the Dow’s detriment, the US index now a greenish shade of flat.
Whilst the Dow struggled the European indices galloped along at an alarming, if slightly more tempered, pace. The FTSE, lifted by the fact that Brent Crude has once again crossed the $36 per barrel mark, maintained its 75ish point surge, whilst the DAX and CAC rose 1.9% and 1.6% respectively, aided by a negative German inflation figure adding to the case for extra ECB QE in March.
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