Newspaper article The Canadian Press

Volatile Time Expected on Markets: Traders Look to U.K. Referendum, Fed Meeting

Newspaper article The Canadian Press

Volatile Time Expected on Markets: Traders Look to U.K. Referendum, Fed Meeting

Article excerpt

Volatile time expected on stock markets

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Stock markets are in for a volatile time this week as traders look to the U.S. Federal Reserve for hints about whether the central bank will hike interest rates before the middle of next year and a referendum that will decide whether Scotland leaves the United Kingdom.

"A lot of volatility, I think, this week," said Andrew Pyle, senior wealth adviser and portfolio manager at ScotiaMcLeod in Peterborough, Ont.

"Flip a coin -- do I watch what the Scots are doing or do I try to figure out what the Fed is doing?"

Markets have generally come around to the view that the Fed will up rates sometime next year, likely in mid-2015. Rates have been near zero since the financial collapse of 2008.

But the economy has improved to a point where it is thought the U.S. central bank can finally act and now traders are wondering if the Fed could move even earlier.

Specifically, they will be looking at the statement released by the Fed at the end of its planned one-day meeting on Wednesday to see if there has been a change in key language.

For some time, the Fed has reassured markets that "it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends."

That quantitative easing program is widely expected to end at the end of October when the Fed finally ends its monthly bond purchases.

Pyle said at some point the Fed will adopt a more hawkish tone on interest rates and remove that language.

"However, it's not clear that that meeting is next week's meeting," he said.

Meanwhile, after largely ignoring the Scottish independence referendum campaign, markets were jolted to attention last week in the wake of a poll that showed the race is now too close to call.

And that has created much uncertainty about how trading desks will react the morning after.

"No one seems to know what's going to happen here. Do they take their own currency?" asked Pyle.

"I don't think it's going to be earth shattering. …

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