European shares were heading for their biggest weekly fall of the year on Friday, as a second week of gains for oil prices and a resurgent euro put the brakes on a two-month bonanza for the region's equity markets.
U.S. economic growth cooled in the fourth quarter as previously estimated, with businesses throttling back on inventory and equipment investment but robust consumer spending limiting the slowdown in the pace of activity.
Which came first: The dove or the egg? Perhaps a better question, following a midweek sell off in equities, is which is more important: The moment at which the FOMC starts to lift short-term interest rates, or the trajectory for the future path of rates?
Following the Federal Open Market Committee meeting last week, Federal Reserve Chair Janet Yellen made it clear (again) that interest rates would not be raised until inflation gains more steam. It’s a prime example of gold’s Fear Trade, which occurs when investors buy gold out of fear of war or concern over changes in government policy.
North American equity markets are feeling pretty healthy this morning as they are edging higher on the day so far, but the U.S. dollar isn’t feeling the same sort of love. If the market continues to believe that the Fed will not do anything to rock the boat over the next few months, there could be a lot more room to run for equities.