Market Report: Markets tread water as Goldman Sachs adds to doubts over a US rate rise in 2015

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A rise in US interest rates this year is no longer a dead cert in the eyes of Goldman Sachs analysts.

The investment bank weighed into the “will they, won’t they?” debate by throwing more uncertainty into the mix — something investors detest — by suggesting the Federal Reserve might not pull the trigger until at least 2016.

A dismal US jobs report on Friday took some of the wind out of hopes of a rise in 2015 with the American economy’s recovery beginning to look more stop-start than before.

Goldman analyst Jan Hatzius said: “Standard monetary policy rules might justify a continuation of the current zero-rate policy for much longer, well into 2016 or potentially even beyond.”

In other words, rates might stay at their record low for much longer than expected.

Though a rise is good for markets in the short-term, it ultimately means the world’s largest economy is not as stable as economists believed — a worrying thought given China’s slowdown.

Hence why the market reaction — the FTSE 100 drifted 40.61 points lower to 6258.31 — was muted after strong gains yesterday

A decline in oil and metals prices dragged shares lower, with the increasingly unpredictable Glencore sliding 2.8p to 112.2p after yesterday’s 20% jump, and Royal Dutch Shell 12.5p lower at 1693.5p.

Investors stocked up on supermarket shares ahead of keenly awaited results from Tesco tomorrow.

A star turn from Sainsbury’s last week boosted the sector and its rise continued as Morrisons climbed 2.3p to 170.5p, Tesco advanced 0.95p to 187.5p and Sainsbury’s gained 0.6p to 267.2p.

Investors in recruiter Robert Walters booked some profits after a solid third-quarter trading update and shares, which have been on a strong run, retreated 11.06p to 428.94p.

Apple supplier ARM Holdings was among the blue-chip losers, down 18.5p to 944.5p after Citigroup cut its iPhone sales forecasts.


Citigroup cut iPhone sales forecasts

Pharma firm BTG was the FTSE 250’s worst performer, rocked by a profit warning, causing the shares to slump 53p to 610p. 

An upgrade to buy from Goldman boosted Imperial Leather soap maker PZ Cussons by 6.1p to 305p.

News that full-year profits at Avon Rubber, which makes rubber masks for the Air Force, will be “significantly ahead of current market expectations” lifted the shares 35.25p to 995.25p.

Postal firm UK Mail delivered investors an 18.93p rise to 380.93p after a much improved trading performance since August’s profit warning.

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October 6, 2015 |
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