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European markets stable before Fed outcome
LONDON, Sept 27, 2018 (BSS/AFP) – Global stock markets were mostly steady
Wednesday as investors awaited the outcome of a US Federal Reserve policy
meeting, expected to deliver a rate increase.
The euro and sterling softened against the dollar pending the monetary
policy decision, while oil prices retreated after a recent surge.
Wall Street came off to a stronger start, and European bourses mostly trod
water.
Market players were “biding their time” ahead of the rate decision, said
David Cheetham at xtb.com, while David Madden at CMC Markets called the
markets’ mood “subdued” ahead of the Fed’s call.
A quarter-point increase has already been factored in by markets, and
attention will quickly focus on any hint that there could be another rate
increase before the end of the year, dealers said.
“The statement is probably going to be the most important component of the
update,” Madden said.
“There is growing chatter that the Fed will hike rates in December, and
dealers will be listening out for clues about a possible rate rise at the
back end of the year,” he said.
Earlier Asian stocks closed with solid increases, helped by strong gains
to share prices of energy companies after a rally for oil prices that petered
out Wednesday.
The dollar was up against the euro and pound, and the yen.
“The US domestic economy is trotting along nicely; the rest of the world
is not in the same place and there’s no doubt that global investor caution is
continuing to increase as the trade war between the US and China appears to
be heating up,” noted Nick Twidale, chief operating officer at Rakuten
Securities Australia.
“Analysts will be watching closely to see if the Fed acknowledges this and
its potential impact on the US.”
While worries about the China-US trade row continue to erode confidence,
the strong US economy and healthy corporate outlook are providing some
buoyancy for now.
But another concern for the global economy are high oil prices that help
to fuel inflation and eventually interest-rate hikes.
The weekend decision by major producers from inside and outside OPEC to
maintain crude output — despite US President Donald Trump’s call for lower
prices — has sent both main contracts sharply higher this week.
Trump hit out at OPEC in his United Nations General Assembly speech
Tuesday, accusing it of “ripping off the rest of the world”.
Brent North Sea oil continues to sit around four-year highs, with a
stronger dollar and expected output cut from Iran adding some lift.
“Oil prices remain in the bulls’ domain amid concern that US sanctions on
Iranian crude oil exports will result in much tighter physical market
conditions once they take effect in November,” said Stephen Innes, head of
Asia-Pacific trading at OANDA.
BSS/AFP/HR/1010