by Pinchas Cohen
Key Events
- Traders wait on Fed policy
- Trump threatens North Korea with annihilation if they don’t back down
- Stocks, currencies, bonds “on hold” ahead of much-anticipated Fed decision; oil and metals advance
After another streak of records in the US yesterday and gains in Europe and Asia, stocks in Asia-Pacific were leaderless this morning, mixed and volatile, and anywhere from flat to slightly lower. Japan’s export-dependent stock-market received a boost, as the country’s trade surplus in August beat 104.4 billion yen with an actual 113.6 billion yen ($1.02 billion). Both Japan’s imports and exports showed double-digit increases, as the global economy’s growth continues.
After a tumultuous Asian session that finished with little change, European stocks remain calm. The question investors must be asking is whether it’s the calm before the FOMC storm, with perhaps too much hope being placed on Fed deliverance from the chaotic geopolitics traders have been working so hard to ignore.
Global Financial Affairs
S&P 500 Futures remained calm too, after the underlying benchmark index advanced for a third day. The futures contract opened lower and pared losses, but it's still below yesterday’s close.
After his UN General Assembly speech yesterday, during which US President Donald Trump threatened North Korea with obliteration if they don't stop menacing the globe, followed by no response thus far from Pyongyang, traders decided to remain steadfastly and exclusively focused on the Fed policy decision later today, at 14:00 EDT. Consensus is for no rate hike this meeting, while trader bets are rising on the possibility of a December increase. As well, it is widely anticipated that the Fed will share its plans regarding shrinking its $4.5 trillion balance sheet.
The dollar extended its decline, as the pound and the euro gained.
Treasury yields are falling (pictured above, US 10-year note). If they close at this level, it will have been the first retreat after 9 sessions of gains.
The Chinese yuan fix is also back in focus as investors try to figure out where the People’s Bank of China wants the currency, following a set of weaker-than-expected fixings last week.
The Mexican peso dropped, after a two-day upmove, when a 7.2 magnitude earthquake rattled the region near Mexico City. More than 200 people are reported dead.
The safe have Japanese yen was flat.
WTI crude bulls went home with a close above $50 yesterday, the first time in four daily attempts to remain at this level, proving that sometimes it's not the third but rather the fourth time that's the charm. Bulls are now targeting the $50.50 level, last Thursday’s high.
Industrial Metals (DE:OD7Z) rose alongside oil, but only after having gapped out of its uptrend since July 20.
Up Ahead
- The Fed may confirm a start date for its balance sheet wind-down.
- OPEC’s technical committee meets in Vienna today.
- U.S.’s Secretary of State Tillerson, EU foreign ministers, Iran’s Zarif set to meet on the sidelines of the UN gathering.
- The Bank of Japan is predicted to stand pat when it reviews policy Thursday.
- Brexit strategy is in focus as Theresa May prepares to outline her revised approach on Friday.
- Campaigning continues in Germany, just days before the Sunday's election. New Zealand goes to the polls on Sept. 23.
Market Moves
Stocks
- The TOPIX ended the session in Tokyo almost flat, at its highest point since August 2015.
- Australia’s S&P/ASX 200 and the KOSPI in Seoul closed slightly lower.
- Both the Hang Seng Index in Hong Kong, as well as the Shanghai Composite closed with an advance after swinging between gains and loss.
- The Stoxx Europe 600 Index slid less than 0.05 percent as of 8:24 a.m. London time.
- The MSCI All-Country World Index rose 0.1 percent to its highest level on record.
- The U.K.’s FTSE 100 jumped 0.1 percent.
- Germany’s DAX ticked up less than 0.05 percent to the highest in more than two months.
- The MSCI Emerging Markets Index jumped 0.1 percent.
- Futures on the S&P 500 Index gained less than 0.05 percent to the highest point on record.
Currencies
- The Dollar Spot fell 0.15 but pared to 0.1 percent, 91.76, at 3:57 EDT.
- The euro advanced 0.1 percent to $1.2004, reaching the strongest in more than a week on its fifth consecutive advance.
- The British pound increased 0.2 percent to $1.3526.
- The Japanese yen climbed 0.1 percent to 111.46 per dollar.
Commodities
- Gold advanced 0.1 percent to $1,312.88 an ounce.
- West Texas Intermediate crude advanced 0.9 percent to $49.94 a barrel, the highest in more than seven weeks.
Bonds
- The yield on 10-year Treasuries fell one basis point to 2.24 percent, the largest fall in almost two weeks.
- Germany’s 10-year yield fell less than one basis point to 0.45 percent.
- Britain’s 10-year yield was unchanged at 1.329 percent, the highest in more than seven months.