The Commerce Department reported yesterday that the U.S. gross domestic product contracted by 0.1% while economists were forecasting growth of 1.1% after a 3.1% expansion in the preceding quarter.
In the FOMC press conference that came a few hours later, The Fed acknowledged that the economy is still struggling to regain momentum. The central bank said that growth had 'paused in recent months,' and while it was taking no new action, it would keep buying $85 billion of bonds a month.
This move by the FED was well expected especially after the disappointing numbers that came a few hours before.
A choppy session is seen in the Asian trading today as the markets digest the disappointing numbers that came out yesterday from the U.S. the Japanese Nikkei 225 rose 0.70% despite Japan’s industrial production figure on a month-over-month basis that came in at 2.5%, less than the 4.5% that economists had anticipated.
Japan’s newly elected Prime Minister Shinzo Abe has promised to push the Japanese economy by aggressively weakening the yen. But economic data, including Thursday’s industrial production, indicates that it may take some time for Japan’s economy to recover.
Elsewhere, in Hong Kong, the Hang Sang eased off the highest level since May 2011, after a number of companies warned of profit declines.
The European stock market opened steady this morning, after the Federal Reserve reaffirmed its commitment to maintaining its easing program at the outcome of its latest policy meeting.
Later in the day, Germany is to publish a preliminary data on consumer inflation and the unemployment change, while the U.S. was to release the weekly government report on initial jobless claims.
The NFP, non-farm payrolls, the most undisputed economic event for the month is expected tomorrow before the opening bell of the U.S session. Ahead of this publication, the markets are expected to move sideways as investors tend to reduce risk especially when the markets are at a 5 year high despite the disappointing GDP data that came yesterday.
GOLD prices soars on Wednesday after the disappointing GDP numbers, fueling already growing expectations for the Federal Reserve to continue stimulating the U.S. economy.
The Fed did deliver the goods on Wednesday and said that it will continue its USD85 billion a month quantitative easing program “if the outlook for the labor market does not improve substantially.”
Resistance: 1677, 1694
Support: 1651, 1643