Market overview: Fed speculation ramps up after CPI data

17th Sep 2014 09:41

1630:Close UK stocks ended the session slightly lower, failing to partake in the gains seen elsewhere, as investors maintained a wary attitude ahead of Thursday´s Scottish referendum. Rightly so given the enormous significance of the event for Britain. European markets on the other hand were buoyed by China´s decision to inject capital into its five main banks. All of the above came ahead of this evening´s policy statement from the US Federal Reserve. FTSE 100 down 11 to 6,781. 1425: According to Capital Economics, August's drop in consumer prices "support[s] Fed doves" ahead of the FOMC meeting later on. "The further softening in US price pressures evident in August’s CPI data ease the pressure on the Fed to amend its 'considerable time' rate pledge at today’s policy meeting," said economist Paul Dales.1340: US consumer prices fell by 0.2% over August, after a 0.1% gain in July. This was the first decline in prices in 16 months and came in below the expectation for no change. US stock futures have erased losses and are now trading in positive territory, supposedly on speculation that the figures may ease the pressure on the Fed to hike rates.1330: US inflation rose by 1.7% year-on-year in August, easing back from the previous month's 2% gain. Analysts had expected a CPI of 1.9%.1300: US stock futures were broadly flat ahead of inflation data and the FOMC meeting. Consumer price inflation is expected to ease to an annual rate of 1.9% in August from 2% in July. "Inflation rising above 2% may force the Fed to reconsider its ultra-dovish stance while a falling inflation rate would give them more leeway when it comes to that first hike," said analyst Craig Erlam from Alpari. Over the month, prices are expected to be unchanged.1200: Eurozone inflation was revised up to 0.4% in August from initial estimates of 0.3%, surprising analysts who expected it to remain unchanged but still well below the European Central Bank’s target of just below 2%.1056: The FTSE 100 is up 16 points at 6,808 with housebuilders such as Barratt Developments and Persimmon providing a lift. ARM Holdings is also a high riser after an upbeat trading update from chipmaking peer Imagination Technologies. Leading the downside is engineer Smiths Group (-5%) after annual results disappointed. Revenues fell 5% to £2.95bn while operating profits declined 10% to £504m, missing Deutsche Bank's £3.05bn and £530m forecasts, respectively.0930: UK jobless claims dropped by 37,200 in August (consensus: -30,000), while the unemployment rate fell to 6.2% from 6.4% (consensus: 6.3%). As expected, at its last policy meeting the MPC decided to maintain its base rate and the size of the asset purchase facility both unchanged by a vote of 7-2.0830: UK stocks began the day slightly higher ahead of the latest employment data here in the UK, not to mention tomorrow´s ´make-or-break´ referendum on Scottish independence. Quite important as well, although it is far, far less important, traders are also anxious ahead of this evening´s meeting of the FOMC. The key will be on whether Fed chair Janet Yellen maintains her pledge to keep interest rates low for “a considerable time”. FTSE 100 up 6 to 6,799.