Market update: FOMC meeting minutes present a mixed message – 11.07.2013

Source: Henderson Global Investors

The release of the latest Federal Open Market Committee’s (FOMC) latest meeting minutes revealed that while some FOMC members thought the Fed should scale back its asset purchases, this should only happen when there is an acceleration in the economy as well as jobs growth. However, almost half of the 19 FOMC participants said the Fed should exit quantitative easing by year-end. Later, speaking to the press, the Federal Reserve (Fed) Chairman Ben Bernanke made surprisingly dovish remarks, saying that “highly accommodative policy is needed for the foreseeable future”. Following these mixed messages the S&P 500 closed flat on Thursday, the Dow Jones was down 0.1% and the Nasdaq 0.5% higher.

In Asia, the Bank of Japan left monetary policy unchanged and said that the economy has begun a moderate recovery; this suggests there is unlikely to be any near-term change to policy. The Nikkei 225 closed up 0.4% today.

This morning European stocks are rallying as investors have taken the Fed’s comments as a reaffirmation of the central bank’s commitment to support the markets. Bond markets are also benefiting with German and French government bond yields falling and in Italy, ahead of a debt auction today 10-year Italian government bond yields fell to 4.41%. The FTSE Eurofirst 300 is up 0.8% while the FTSE 100 is up 1.0%.