Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:
WHAT WE’RE WATCHING TODAY
No Surprises Expected At Fed Meeting; Incremental Taper Set To Continue
The Federal Reserve ends a two-day meeting today with its 18.00 GMT statement, where it is expected to announce that it will cut back its quantitative easing, bond buying program by a further $10 to $45 billion a month. The Fed is likely to discuss its statement, the economy and the conditions that might lead it to raise short term interest rates. The central bank’s policy statement could be a little more upbeat on the margin, as recent economic data has supported the central bank’s conclusion that economic growth was only temporarily held down in the first quarter by winter storms. In March, the Fed statement said that the economy slowed in March “in part” because of the storms.
The data the Fed will review during its meeting will also interest the markets. First quarter GDP will be released and economists expect a super sluggish 1.2 percent rate of growth in the first quarter. On the upside, ADP also releases its private sector payroll report and expects a 210,000 increase in April payrolls, close to what is expected in the government’s Friday jobs report. Fed officials believe the economy is on track to slowly improve in the second half of the year and could be strong enough for the central bank to begin to raise short-term interest rates in the second half of 2015.
Dollar Up Versus Euro Following Soft German Inflation
The U.S. dollar rose against the euro on Tuesday after a softer than expected reading on German inflation added to mounting concern about the euro zone’s low inflation, which could initiate further easing from the European Central Bank if it continues. The euro EUR/USD fell to $1.3809 from $1.3851 late Monday. A preliminary reading on German HICP inflation showed an increase of 1.1% in April, missing estimates of a 1.3% rise in inflation. The central bank targets inflation of just under 2% in the medium term as a guidepost for its monetary policy. The ECB has maintained that its inflation expectations remain anchored, while pointing out that continued low levels of inflation could pose a risk to those expectations. ECB officials have highlighted the high level of the euro exchange rate as a factor weighing on inflation and have mentioned quantitative easing as a valid policy option. Most analysts agree that the euro likely won’t substantially lower from its current level until a concrete action is taken by the central bank.
Twitter’s Lackluster Results Leave Investors Twitchy
Twitter reported lackluster user and usage growth for the second consecutive quarter yesterday, deepening investor concerns about its struggle to gain a mass following. Twitter’s stock fell more than 10 percent after hours to $38.05, below its post-initial public offering low of $38.80 on November 25. More worryingly, the company said its 255 million monthly users, on average, appeared to check the service less frequently than a year ago. The results revealed slowing momentum at a company that exuberant investors just six months ago had argued could one day match Facebook’s scale. At its peak in December, Twitter enjoyed a $46 billion market capitalization on just $665 million of revenue in 2013, making it one of the world’s priciest stocks. Cracks began to show in February, when Twitter disclosed that user growth had fallen to its lowest rate in years, prompting Chief Executive Dick Costolo to promise tweaks to Twitter’s design. Investors will be closely monitoring Twitter stock prices as these new developments are implemented amid the latest disappointing earnings report.
That sums up today’s highlights! Don’t forget you can find us on Facebook, Twitter, Google+ and LinkedIn where you can find all the latest news and updates on the markets. We hope you have a profitable day on the markets.
