Dollar, Treasuries trade without conviction before Fed meet
Sterling clings to gain as clamor for ‘soft Brexit’ grows
European equity investors were in a bullish mood as technology companies extended their winning streak, leading gains across almost all sectors. The dollar weakened a third day and Treasuries rose, neither with much conviction as traders tread water before the U.S. interest rate decision.
The Stoxx Europe 600 Index headed for the highest in more than a week as companies including ASML Holding NV and Hexagon AB led the tech share revival in the region. The British pound, which rose Tuesday for the first time since the U.K. election, traded sideways as pressure mounted for Theresa May to abandon a so-called hard Brexit. Oil resumed its decline as industry data showed U.S. crude stockpiles expanded and the International Energy Agency predicted new non-OPEC output would outstrip demand growth next year.
As stocks stabilize in the wake of the tech wobble and sterling regains its feet, all eyes will now turn to the Federal Reserve as it sets borrowing costs in the world’s biggest economy. Policy makers are widely expected to raise interest rates, stick to previous guidance for another hike before year-end, and probably acknowledge that inflation is muted. The $4.5 trillion question will be what clues are given on the timetable and scale of eventual balance sheet reduction.
“Markets will probably mostly just trade sideways today in front of the Fed’s rate decision and press conference tonight,” John Cairns, a Johannesburg-based currency strategist at Rand Merchant Bank, said in a client note. “The range of issues that the bank has to cover and the market’s sensitivities to even the slightest changes suggests some market volatility after the event.”
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Here are the key events to watch this week:
- Data before the Fed is expected to show consumer-price growth slipped back to 2 percent in May with the core stuck at 1.9 percent. Real average earnings growth data will be released at the same time.
- Lest we forget, central banks in Japan, Switzerland and Britain are also scheduled to weigh in with policy decisions this week. Investors have reined in expectations for a Bank of England interest-rate increase after the election shock.
- EIA data today on oil inventories will be parsed to see if it confirms API figuresfrom Tuesday.
And here are the major movers:
- Chinese data showed resilience in retail sales and industrial output, but equity markets there fell on concerns about a crackdown on the insurance industry.
- The Shanghai Composite Index tumbled 0.7 percent and the CSI 300 Index dropped 1.3 percent, its biggest loss this year. The Hang Seng Index erased losses to add 0.1 percent and the Kospi Index in South Korea fell 0.1 percent.
- Japan’s Topix Index closed down 0.1 percent, while Australia’s S&P/ASX 200 Index climbed 1.1 percent to its highest since May 16.
- The Stoxx Europe 600 Index gained 0.5 percent at 10 a.m. in London, building on its 0.6 percent increase Tuesday.
- S&P 500 futures were little changed. The gauge added 0.5 percent Tuesday and the Nasdaq 100 climbed 0.8 percent, rebounding from its worst two-day drop of the year.
- The pound slipped less than 0.1 percent to $1.2743 after it strengthened 0.8 percent Tuesday.
- The Canadian dollar rose 0.2 percent, gaining for a fifth day. The euro was little changed at 1.1210.
- The Bloomberg Dollar Spot Index fell 0.1 percent. The yen was also 0.1 percent weaker at 110.19 per dollar.
- The yield on 10-year Treasuries was down one basis point at 2.20 percent.
- The yield on U.K. gilts dropped four basis points to 1 percent after rising seven points on Tuesday
- West Texas crude futures fell 1.1 percent to $45.94 a barrel. U.S. inventories climbed by 2.75 million barrels last week, the American Petroleum Institute was said to report.
- Gold rose 0.1 percent to $1,268.30 an ounce.
by Garfield Clinton Reynolds and Samuel Potter
June 14, 2017, 7:02 PM GMT+10