Market Update: Federal Reserve Left Rates Unchanged. Would Investors Opt for Reshuffling?

The Federal Reserve or Fed has kept the rates unchanged in their November 2018 meeting and this was expected by the market participants. The broader markets were looking for anything specific in the commentary which could hint the Fed’s next move with respect to the December 2018 meeting and further meetings in 2019. On November 8, 2018, Dow Jones Industrial Average ended the session at 26,191.22 which implies an increase of 10.92 points or 0.042%. Gradually, the apex bank would be tightening the monetary policy, hence, it is expected that in December meeting the US economy and market players need to prepare themselves for another rate hike. The market players stated that even though the markets have encountered heightened volatility, the Fed has not changed its plans for raising the rates. Earlier, the market participants were expecting that Federal Reserve might decide to not to raise rates in the December meeting because of the global market sell-off. However, it seems like those hopes are now dashed and a hike is possible.

A Quick Look at the Macro Variables Impacting Oil Markets

The oil prices continue to fall and the primary drivers for this downturn are the elevated supply levels as well as worries regarding the economic slowdown. The market participants stated that since the oil prices are continuously falling, it would not be wrong to say that the oil prices are now in the bear market phase. According to them, the OPEC exports are continuously rising which are, in turn, building up the inventories and thus, the oil prices continue to fall. On the other hand, the concerns regarding the slowdown in the global economy are also weighing on the oil prices which is pulling the prices down. Earlier, the oil prices were increasing at a rapid pace because of the sanctions imposed by the US on Iran. However, later on, the United States have also granted exemption to some of the countries. The oil traders need to carefully analyze the global market parameters before taking any position.

Analyzing ASX Performance and RBA’s views

The Australian markets ended the session on November 9, 2018 by witnessing a marginal fall. S&P/ASX200 stood at 5921.8 which implies a marginal fall of 6.4 points or 0.1%. G8 Education Limited (ASX: GEM) and Sigma Healthcare Limited (ASX: SIG) closed the session by advancing 11.321% and 4.902%, respectively. On the other hand, Lendlease Group (ASX: LLC) and Corporate Travel Management Limited (ASX: CTD) have witnessed a decline of 18.338% and 8.41%, respectively.

The stock price of AMA Group (ASX: AMA) witnessed the substantial rise after they have made an announcement regarding the capital raising program. For more information, click here. Unibail-Rodamco-Westfield (ASX: URW) completed the unloading of the Paris-based office building.

The Reserve Bank of Australia or RBA believes that a decline in the unemployment rate is expected which could further lead to wage growth. This viewpoint is underpinned by the apex body’s views that the global factors which were hindering earlier have now started to cool off. Earlier, the central bank had stated that favorable economic outlook has prompted the apex body to anticipate a fall in the jobless rate. They had expected that unemployment rate could be 4.75% by 2020. The Reserve Bank of Australia also stated that technological changes, globalization as well as changes in the relative bargaining power are the factors which have resulted in the weakening of wage growth.

A decline in the wage growth had also led to a rise in the household debt and the RBA is of the view that it could negatively impact the consumption.


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