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| Markets edgy ahead of Fed rate decision and UK inflation data – business live | Markets edgy ahead of Fed rate decision and UK inflation data – business live |
| (35 minutes later) | |
| World stock markets have a decidedly edgy feel this morning, as investors wait for the Fed’s rate decision. | |
| China’s Shanghai Composite index has fallen by 1%, amid ongoing anxiety about trade relations with the US. Japan’s Nikkei has dipped by 0.6%. | |
| European shares are more positive; with the Stoxx 600 up around 0.2%. | |
| The FTSE 100 is bouncing back from yesterday’s selloff, up around 0.35%. GSK are leading the way, as investors hail its break-up plan. | |
| Boom! Shares in pharmaceutical giant GlaxoSmithKline have soared by 5% at the start of trading, after it surprised the City with a break-up plan. | Boom! Shares in pharmaceutical giant GlaxoSmithKline have soared by 5% at the start of trading, after it surprised the City with a break-up plan. |
| GSK has agreed to spin off its consumer healthcare business in a £10bn joint venture with rival Pfizer. | GSK has agreed to spin off its consumer healthcare business in a £10bn joint venture with rival Pfizer. |
| GSK, whose consumer brands include Sensodyne and Panadol, will have a controlling stake in the partnership of 68% and Pfizer will own 32%. | GSK, whose consumer brands include Sensodyne and Panadol, will have a controlling stake in the partnership of 68% and Pfizer will own 32%. |
| The FTSE 100 drug maker said that within three years of closing the deal, it will demerge and float the consumer health business, splitting GSK into two distinct businesses – one focused on consumer and the other on pharmaceuticals and vaccines. | The FTSE 100 drug maker said that within three years of closing the deal, it will demerge and float the consumer health business, splitting GSK into two distinct businesses – one focused on consumer and the other on pharmaceuticals and vaccines. |
| Investors around the globe will be watching Fed chair Jerome Powell tonight, when he explains tonight’s interest rate decision. | Investors around the globe will be watching Fed chair Jerome Powell tonight, when he explains tonight’s interest rate decision. |
| Shares could soar, or slide, depending on the guidance that Powell gives for future rate hikes in 2019. Ditto the dollar. | Shares could soar, or slide, depending on the guidance that Powell gives for future rate hikes in 2019. Ditto the dollar. |
| Naeem Islam of Think Markets explains: | Naeem Islam of Think Markets explains: |
| Market participants widely expect the statement to be somewhat dovish and the markets believe that going into 2019, the Fed isn’t going to be this aggressive because of the tighter financial conditions. Mr Powell is likely to indicate two or maximum three rates hikes in 2019. For investors, one to two rate hikes would be considered more dovish to neutral but two to three rate hikes would be aggressive because the economic indicators have started to flash warning light with respect to any aggressive monetary policy. | Market participants widely expect the statement to be somewhat dovish and the markets believe that going into 2019, the Fed isn’t going to be this aggressive because of the tighter financial conditions. Mr Powell is likely to indicate two or maximum three rates hikes in 2019. For investors, one to two rate hikes would be considered more dovish to neutral but two to three rate hikes would be aggressive because the economic indicators have started to flash warning light with respect to any aggressive monetary policy. |
| In terms of trading the event, aggressive tone by the Fed would be negative for the equity market and the sell-off may become intense. The Dow Jones may take a nose dive and the move could in the range of 300-500 points. However, a dovish statement could support the equity markets and it would restore some confidence so investors expect about 150-250 points move for the Dow on the back of this. | In terms of trading the event, aggressive tone by the Fed would be negative for the equity market and the sell-off may become intense. The Dow Jones may take a nose dive and the move could in the range of 300-500 points. However, a dovish statement could support the equity markets and it would restore some confidence so investors expect about 150-250 points move for the Dow on the back of this. |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| To hike or not to hike, that is the question facing America’s central bankers today. | To hike or not to hike, that is the question facing America’s central bankers today. |
| The Federal Reserve had been certain to raise interest rates at its final meeting of 2018 today, in line with its policy of normalising monetary policy and tackling inflation. | The Federal Reserve had been certain to raise interest rates at its final meeting of 2018 today, in line with its policy of normalising monetary policy and tackling inflation. |
| But Donald Trump has thrown clouds of uncertainty over the Fed, by repeatedly urging the Fed to leave interest rates alone. | But Donald Trump has thrown clouds of uncertainty over the Fed, by repeatedly urging the Fed to leave interest rates alone. |
| After several stinging tweets, the markets now reckon there’s a 25% chance that the Fed won’t hike at tonight’s monetary policy meeting: | After several stinging tweets, the markets now reckon there’s a 25% chance that the Fed won’t hike at tonight’s monetary policy meeting: |
| I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck! | I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck! |
| It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory! | It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory! |
| So great that oil prices are falling (thank you President T). Add that, which is like a big Tax Cut, to our other good Economic news. Inflation down (are you listening Fed)! | So great that oil prices are falling (thank you President T). Add that, which is like a big Tax Cut, to our other good Economic news. Inflation down (are you listening Fed)! |
| But central bank independence is important. So despite Trump’s best efforts, the Fed will probably push US borrowing costs up again tonight (while bracing for another Twitter blast), to 2.5%. | But central bank independence is important. So despite Trump’s best efforts, the Fed will probably push US borrowing costs up again tonight (while bracing for another Twitter blast), to 2.5%. |
| But the Fed will also update the markets on its plans for 2019, and many investors predict it will slash its forecasts for future rate hikes. | But the Fed will also update the markets on its plans for 2019, and many investors predict it will slash its forecasts for future rate hikes. |
| Jasper Lawler of London Capital Group explains: | Jasper Lawler of London Capital Group explains: |
| The market is pricing in a 72.3% probability of the Fed hiking today. This would be the fourth-rate hike for 2018. However, the real concern for the market is what comes next. With growing fears over the health of the global economy, the markets simply don’t think the US economy can handle higher rates. | The market is pricing in a 72.3% probability of the Fed hiking today. This would be the fourth-rate hike for 2018. However, the real concern for the market is what comes next. With growing fears over the health of the global economy, the markets simply don’t think the US economy can handle higher rates. |
| Traders will be watching for dovish signs, such as the dropping of the phrase “further gradual rate rises” from the statement and a softening of the dot plot from three hikes to at most two. In short, if the Fed must hike today, and they will struggle to justify not hiking on current US economic strength; then it will need to be a dovish hike to prevent the US equity markets dumping once more. The dollar has traded lower across the week in anticipation of a dovish hike. | Traders will be watching for dovish signs, such as the dropping of the phrase “further gradual rate rises” from the statement and a softening of the dot plot from three hikes to at most two. In short, if the Fed must hike today, and they will struggle to justify not hiking on current US economic strength; then it will need to be a dovish hike to prevent the US equity markets dumping once more. The dollar has traded lower across the week in anticipation of a dovish hike. |
| Such a dovish hike might calm market nerves, after a turbulent few months. | Such a dovish hike might calm market nerves, after a turbulent few months. |
| The Powell Fed is aiming to reclaim discretion, distancing itself from straitjackets like R-star, the words "gradual increases in the target range," and -- eventually -- the dot plot. This is a stylistic change, but markets hear DOVISH and price less than two hikes through 2019. pic.twitter.com/jE9vrlHy87 | The Powell Fed is aiming to reclaim discretion, distancing itself from straitjackets like R-star, the words "gradual increases in the target range," and -- eventually -- the dot plot. This is a stylistic change, but markets hear DOVISH and price less than two hikes through 2019. pic.twitter.com/jE9vrlHy87 |
| Earlier this week the US stock market fell to a 14-month low, while Britain’s FTSE 100 closed at a two-year low last night. | Earlier this week the US stock market fell to a 14-month low, while Britain’s FTSE 100 closed at a two-year low last night. |
| Growth fears drive FTSE 100 to two-year closing low - as it happened | Growth fears drive FTSE 100 to two-year closing low - as it happened |
| Also coming up.... | Also coming up.... |
| New UK inflation figures will also show how the cost of living changed last month in Britain. Economists predict that consumer prices rose by 2.3% last year, down from 2.4% in October. | New UK inflation figures will also show how the cost of living changed last month in Britain. Economists predict that consumer prices rose by 2.3% last year, down from 2.4% in October. |
| It could confirm that retailers have been slashing prices in recent months, in an attempt to persuade shoppers to part with some cash. | It could confirm that retailers have been slashing prices in recent months, in an attempt to persuade shoppers to part with some cash. |
| The agenda | The agenda |
| 9.30am GMT: UK inflation data for November | 9.30am GMT: UK inflation data for November |
| 11am GMT: UK retail sales figures for November | 11am GMT: UK retail sales figures for November |
| 7pm GMT: US Federal Reserve interest rate decision | 7pm GMT: US Federal Reserve interest rate decision |
| 7.30pm GMT: Fed chair Jerome Powell’s press conference | 7.30pm GMT: Fed chair Jerome Powell’s press conference |