Under the U.S. Federal Reserve’s new monetary policy, interest rates are likely to remain low for longer
European stock markets are set to open higher Friday, buoyed by the U.S. Federal Reserve’s new monetary policy framework which will likely see interest rates in the world’s dominant economy remaining low for longer.
At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.5% higher, the FTSE 100 futures contract in the U.K. rose 0.4%, while CAC 40 futures in France climbed 0.3%.
Under the new approach, the Federal Reserve will seek to achieve inflation averaging 2% over time, offsetting below-2% periods with higher inflation “for some time,” and to ensure employment doesn’t fall short of its maximum level.
Their new language gives them the flexibility to let the economy run a little hotter before contemplating raising interest rates and gives the green light to more modest yield curve steepening and dollar weakness, analysts at ING said, in a research note.
The need for an accommodative policy was illustrated by Thursday’s weekly claims data which showed some 27 million Americans are still receiving some kind of government unemployment assistance.
Turning back to Europe, the German GfK consumer climate index disappointed, with the September figure dropping to -1.8 from -0.2 in August, a development that parallels the revival of the coronavirus in a country that had handled the first wave better than most.
In corporate news, Norwegian Air Shuttle is likely to be in focus Friday after it warned that there is “significant” doubt over its ability to continue as a going concern if it can’t meet its financial obligations next year.
Sanofi said Friday that it intends to start a tender offer for the acquisition of U.S.-based biopharmaceutical company Principia Biopharma.
Oil prices were largely unchanged Friday, with Hurricane Laura blowing through Louisiana and Texas, the heart of the U.S. oil industry, without causing major damage to refineries.
Limited refinery damage and the quick resumption of capacity is good news for crude oil demand, although for now that is not reflected in the market, said analysts at ING, in a research note.
That said, WTI is on track to rise 1.5% this week, for a fourth straight week of gains, while Brent is heading for a weekly gain of 1.6%.
U.S. crude futures traded flat at $43.05 a barrel, while the international benchmark Brent contract rose 0.1% to $45.65.
Elsewhere, gold futures rose 0.9% to $1,949.50/oz, while EUR/USD traded 0.5% higher at 1.1877.
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