Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Stocks, dollar hold gains with all eyes on Fed meeting

Stock MarketsJun 17, 2019 08:21AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. The German share price index DAX graph at the stock exchange in Frankfurt

By Marc Jones

LONDON (Reuters) - Share markets couldn't add to recent gains and government bond yields inched fractionally higher on Monday, as investors hunkered down for what is shaping up to be a crucial week for global monetary policy.

With expectations running high that the U.S. Federal Reserve will signal on Wednesday its first rate cut since the financial crisis, only a few asset classes were straying far.

The focus was still the dollar's surge late last week after above-forecast U.S. industrial output and retail sales data and upbeat consumer confidence soundings pushed back futures markets bets of any quick Fed chop.

The greenback held its gains as most major currencies trod water [/FRX]. Wall Street futures looked flat too, while a 10% drop in German airline Lufthansa's shares following a profit warning kept Europe's STOXX 600 subdued. (EU)

"A (U.S.) rate cut this week seems extremely premature," said Royal Bank of Canada Capital Market's Global Head of FX Strategy Elsa Lignos.

"But the Fed can make some communications tweaks that at least open up the possibility for a cut in July. The question is how flexible that messaging will be."

Traders are pricing a high probability of a July rate cut, despite there being unusually high uncertainty, particularly around trade, Lignos added. She said a G20 meeting late this month could also change the narrative again.

The main concern, though, is if tensions do continue, the trade war could tip the U.S. and other economies into recession.

European Central Bank board member Benoit Coeure said in an interview that the bank's sub-zero interest rates could be cut again if needed. It could also restart the quantitative easing program it wound down at the end of last year.

It came too as long-term euro zone inflation expectations hit a new all-time low. Euro zone bond yields did inch fractionally higher as had U.S. Treasuries, though to all intents and purposes they were still in multi-year troughs. [GVD/FRX]

The dollar's index against a basket of six major currencies, meanwhile, brushed a two-week high of 97.603 as the yen drifted and the euro fetched $1.1216, near the lower end of its recent trading range. [/FRX]

"The question is not whether we have instruments; we do have instruments. We can change our guidance. We can cut rates. We can restart QE," Coeure told the Financial Times.

"The question is which instrument, or combination of instruments, would be best suited to the circumstances."

HONG KONG

In emerging markets, average sovereign yields were at 6-year lows [.JGEGDCM] and a welcome drop in unemployment helped Turkey's markets brush off another sovereign downgrade from Moody's and a warning risks of a full-blown crisis were rising.

MSCI's broadest index of Asia-Pacific shares outside Japan had ended slightly weaker overnight while Japan's Nikkei average had closed flat.

The Bank of Japan also meets this week and is widely expected to reinforce its commitment to its massive stimulus program.

There had been something of boost from Hong Kong's Hang Seng Index which finished 0.4% higher. At the weekend, the territory's leader Carrie Lam backed down over a bill that would have allowed extradition to China.

The Hang Seng had fallen for three sessions in a row, after the extradition bill triggered mass protests and some of the worst unrest seen in the territory since Britain handed it back to Chinese rule in 1997.

"Last week the issue looked as if it would become another thorny point between the United States and China. As the bill is now being postponed indefinitely, things will likely calm down, which is good for markets," said Hiroyuki Ueno, senior strategist at Sumitomo Mitsui Trust Asset Management.

Mainland Chinese shares traded within a tight range, with the benchmark Shanghai Composite up 0.2% and the blue-chip CSI 300 barely budging.

U.S. Secretary of State Mike Pompeo told Fox News on Sunday that President Donald Trump would raise the issue of Hong Kong's human rights with China's President Xi Jinping at a potential meeting of the two leaders at the G20 summit in Japan this month.

(Graphic: Trade tensions boost U.S. rate-cut expectations - https://tmsnrt.rs/2KdE2by)

(Graphic: Asian stock markets - https://tmsnrt.rs/2zpUAr4)

Bitcoin jumped overnight to $9,391.85, its highest level in 13 months. It was last quoted at $9,195.62, up 2.4%.

Geopolitical tensions in the Middle East added another layer of uncertainty after the United States blamed Iran for attacks on two oil tankers in the Gulf of Oman last week.

Pompeo had also said Washington will take all actions necessary to guarantee safe navigation in the Middle East, though oil prices slipped again as worries about the broader slowdown in the global economy dominated. [O/R]

Brent futures fell 65 cents, or 1%, to $61.36 a barrel after gaining 1.1% on Friday. U.S. West Texas Intermediate (WTI) crude futures were down a similar amount at $51.95, having firmed by 0.4% in the previous session.

Also sapping prices was the dim outlook for oil demand growth in 2019 projected by the International Energy Agency (IEA) on Friday, citing worsening prospects for global trade.

Stocks, dollar hold gains with all eyes on Fed meeting
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email