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WORLD-MARKETS-UPDATE
Asian markets mixed ahead of key Fed meeting
HONG KONG, Sept 18, 2019 (BSS/AFP) – Asian equities were mixed Wednesday,
with attention turning to the Federal Reserve’s key policy decision later in
the day, while investors remain on alert for developments in the Middle East
after the attack on Saudi oil facilities rocked markets.
Crude prices tumbled Tuesday and were almost unchanged in Asia following
news that Riyadh will get its two major installations back online earlier
than expected, though analysts said there was nervousness on trading floors
about oil security in the future.
With fears low for now of a military retaliation against Iran — accused of
being behind the strikes — focus is now on the Fed, which is expected to cut
interest rates while its post-meeting statement will be closely followed for
clues about future plans.
Global markets have spent most of this month rising on bets that central
banks, led by the Fed, will move to a softer monetary policy to offset a
slowdown in most economies exacerbated by the China-US trade war.
“A rate cut of 25 basis points is universally regarded as a done deal by
global markets,” said OANDA senior market analyst Jeffrey Halley.
“What will be closely watched is the press conference 30 minutes later,
where we will gain more clarity as to whether the Fed has moved to an
explicit easing bias.
“The likelihood of a shift from neutral to easing will be high as the
(policy board) will not be able to ignore the storm cloud around the rest of
the world that must eventually start raining on the United States.”
Oxford Economics estimates the Fed will cut three more times this year,
which would erase all its 2018 rate hikes.
The Fed has been forced to pump more than $100 billion into US financial
markets owing to a tightening of liquidity that had seen short-term lending
rates spike for companies.
Equity traders shifted cautiously with Asian markets struggling for
traction.
Hong Kong was 0.1 percent off, while Tokyo finished 0.2 percent down after
a 10-day winning streak. Sydney slipped 0.2 percent and Singapore fell 0.4
percent with Manila and Bangkok also off.
But Shanghai ended up 0.3 percent, Seoul added 0.4 percent and Taipei rose
0.5 percent, while Mumbai and Jakarta also rose.
MORE/HR/1438
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WORLD-MARKETS-UPDATE 2 LAST HONG KONG
– Eyes on Pompeo –
Dealers have been given some optimism by the US and China’s resumption of
trade negotiations next month, with a delegation from Beijing reportedly
visiting Washington this week for preparatory talks.
However, there are fresh worries about the impact on the already stuttering
world economy from the Saudi oil attacks on Saturday.
While the resumption of output from the world’s biggest exporter provided
some much-needed relief, observers said long-term energy security is now a
concern.
“Restoring production may placate global investors’ immediate economic
concerns, but that’s only half the problem as the attacks exposed some
significant vulnerabilities,” said Stephen Innes at AxiTrader.
“None more so than just how inadequately prepared the markets are for
disruptions of this magnitude which suggest that the supply risk premium
could stick around well after production is restored.”
Eyes are on US Secretary of State Mike Pompeo, who departed for Saudi
Arabia Tuesday to discuss possible retaliation, while Vice President Mike
Pence said: “As the president said, we don’t want war with anybody but the
United States is prepared.”
A US official, speaking on condition of anonymity, told AFP the White House
has concluded the attack — claimed by Huthi rebels in Yemen — involved
cruise missiles from Iran and that evidence would be presented at the UN
General Assembly next week.
Daniel Hynes, a senior commodity strategist at Australia & New Zealand
Banking Group, warned investors could be in for more shocks.
“The market is certainly setting itself up for a surprise, considering they
aren’t really pricing in that geopolitical risk premium at the moment.”
In early trade London and Frankfurt were both flat, while Paris edged up
0.1 percent.
– Key figures around 0810 GMT –
Tokyo – Nikkei 225: DOWN 0.2 percent at 21,960.71 (close)
Hong Kong – Hang Seng: DOWN 0.1 at 26,754.12 (close)
Shanghai – Composite: UP 0.3 percent at 2,985.66 (close)
London – FTSE 100: FLAT at 7,322.31
West Texas Intermediate: DOWN 14 cents at $59.20 per barrel
Brent North Sea crude: UP 11 cents at $64.66 per barrel
Euro/dollar: DOWN at $1.1054 from $1.1071 at 2100 GMT
Dollar/yen: UP at 108.18 yen from 108.13 yen
Pound/dollar: DOWN at $1.2475 from $1.2497
Euro/pound: DOWN at 88.61 pence from 88.57 pence
New York – Dow: UP 0.1 percent at 27,110.80 (close)
BSS/AFP/HR/1440