Europe has opened stronger this morning following good news on the debt ceiling front and a heavy indication from US Federal Reserve committee members on what will happen to rates this month.
The House of Representatives waved through the agreed deal between President Joe Biden and the Republicans. It still has to pass a Senate vote but that should be a formality. It’s good news for markets but some are still worried about the scale of the cuts that were agreed. There’s also an issue of timing, the Senate vote could take time and the US isn’t getting any richer. US stocks ended lower overnight but much of the panic settled in before the vote took place and now it’s done, you’d expect prices to rise later on when markets open.
But it’s other news from the US affecting share prices more. It’s now increasingly likely the Fed will not hike interest rates later this month, taking a pause. This comes after two members, including vice chair Philip Jefferson, said as much. However, he did also say a “pause” would not necessarily mean the Fed was done increasing rates. It’s interesting they have come out so strongly with guidance for this month, effectively undermining tomorrow’s non-farm payroll jobs reports which traders were going to keenly look at. The Fed seems worried markets are still being too optimistic about rates. Guidance for this month is helpful but I imagine they want markets to really digest the second part of the statement: it’s not over yet.
Either way, markets are in positive mode. The FTSE 100 is up 0.66 per cent, its first really positive day for a while now. The DAX is even higher at 0.87 per cent and even the Nikkei has turned around a poor run for Asian stocks and notched up 0.84 per cent. Paris leads the way just shy of 1 per cent. Revised PMIs for the Eurozone was better news for both Germany and France, but the former’s numbers are still shocking, especially considering it technically entered a recession last week.
Elsewhere, my colleague Mitchell Labiak reports that UK house prices fell again this month. Or did they? Once again, the consensus is as clear as mud after lender Nationwide reported a 0.1 per cent fall for the month of May following a 0.4 per cent rise in April. But this was only on a seasonally adjusted basis. According to the raw numbers, the average house price actually increased by 0.1 per cent in May. The month-on-month figures are leaving investors a bit helpless, while the official, albeit dated figures from the ONS, show a consistent fall. There’s a lot more to it though, as Mitchell explains here.