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both NASDAQ and S&P drop after a strong start in maarch

NASDAQ Hits a New Record, FTSE Surges to a 20-Month High & Oil Prices React to Biden’s Push for Production Increase

NASDAQ records new high prior to FOMC meeting

The tech-centric NASDAQ was trading at record highs to start the week, as markets geared up for a highly anticipated FOMC meeting on Wednesday.

Many expect this latest Federal Reserve meeting will signal the first policy change since the start of the pandemic last March.

Although it is expected that interest rates will remain unchanged, markets believe the Fed may move to taper its bond buying programme.

💡 How does the Fed affect the economy?
Through the FOMC, the Fed uses the federal funds target rate as a means to influence economic growth.
To stimulate the economy, the Fed lowers the target rate. If interest rates are low, the presumption is that consumers can borrow more and, consequently, spend more. 

The meeting will come ahead of Friday’s Non-farm payrolls, which are expected to see 450,000 jobs added to the U.S. economy.

As of writing, the NASDAQ was trading 0.41% higher, with GBPUSD falling to a 4-week low of 1.3641 in the process.

FTSE 100 hits 20-month high ahead of BOE rate decision

In the United Kingdom, the FTSE 100 hit its highest level since the start of the pandemic, as investors prepared for Thursday’s Bank of England meeting.

The benchmark FTSE 100 closed Monday’s session 0.71% higher, hitting an intraday high of 7,302.79 in the process.

This was the highest point the index has traded since February 2020 and comes as the Bank of England is expected to increase interest rates later this week.

💡 Inflation… Still an issue
Inflation in Britain looks set to rise to 5% – more than double the BoE’s 2% target – despite a slowdown in the economy’s recovery from last year’s slump, and BoE Governor Andrew Bailey has talked of the need to act to contain inflation expectations.

Monday’s move also comes as Britain and France argued overfishing territory in a Brexit related dispute.

In response to increased tensions, Foreign Secretary Liz Truss stated that, “The French have made completely unreasonable threats, including to the Channel Islands and to our fishing industry, and they need to withdraw those threats or else we will use the mechanisms of our trade agreement with the EU to take action”.

Oil prices rise, as Biden pushes for production increase

Oil prices were higher during Monday’s session, as it is expected that OPEC will maintain output levels, despite pressure from U.S president Biden to increase production.

During the G20 summit in Rome, a senior member of Biden’s administration stated that, “We have to be able to talk privately with partners to think about what tools we have available to us to deal with this in the event that OPEC-plus doesn’t step up and increase production”.

💡 Are fossil fuels essential to economic growth?
Fossil fuels are essential, not luxuries that can be shunted aside. The U.S. Energy Information Administration (EIA) reports that oil, gas and coal account for 80 percent of the country’s energy supply, and will continue to do so far into the future. Renewable energy contributes only marginally. Wind and solar, for example, meet a shade over 3 percent of the country’s energy needs.

Fossil fuels also are critical to advancing the well-being of millions of people in developing countries where electricity, potable water and sanitation remain the most needed basic services.

Despite this, members of the Organization of the Petroleum Exporting Countries and allies which include Russia, look set to vote on maintaining output this coming week.

As of writing this, WTI crude was trading at an intraday high of $85.12.

“Do not anticipate and move without market confirmation – being a little late in your trade is your insurance that you are right or wrong.”

– Jesse Livermore

Eliman Dambell

Senior Market Analyst