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US slowdown fails to dent prospect of rate hike

Published Friday, October 30th, 2015

Concerns over looming central bank policy continued to preoccupy investors yesterday as European and Asian bourses had the first chance to react to the Federal Reserve’s newfound hawkishness. The response was however largely muted with shares treading water for most of the session only to end marginally lower as poorly-received earnings sagged on sentiment. Solid economic data out of the eurozone’s engine economy revealing a fall in German unemployment and rebounding inflationary pressures may have also weighed on risk appetite as it dampened hopes of further ECB stimulus.

An update on the health of the world’s biggest-economy was the day’s main risk event but it prove to be anything but as a first estimate of 3Q US GDP came broadly in line with forecasts at +1.5% and significantly down on the previous quarter’s +3.9%. The widely-predicted slowdown in US economic growth came as healthy levels of household spending were countered by a hefty cut back in business inventories. Expectations are that the pace of growth will pick up in the final quarter of the year and the figure was consistent with the Fed’s latest assessment of the US economy which means a year-end rate hike is still on the cards.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.