FT: Europe stocks steady ahead of Fed policy decision
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Wednesday 09:40 GMT. European stocks and US index futures are nudging higher after a solid Asian session as investors await the Federal Reserve and any guidance on whether the US central bank might lift interest rates this summer.
The Fed is on Wednesday expected to remove a pledge to be “patient” before raising borrowing costs when it concludes two days of deliberations.
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Market forecasts are for the Fed to lift rates either in June or September, but the stronger dollar and some recent soft data have muddied the economic waters going into the meeting.
“After months of conjecture on when the Fed will drop the word patience” from its FOMC statement, the wait seems to be almost over,” said analysts at Citi.
“It’s almost that time where we will have to wade through a raft of analysis and speculation on when the Fed will begin raising rates, as well as deal with some hefty market swings.”
But not yet. An unwillingness among traders to take bold bets ahead of the Fed’s announcement at 1800 GMT, and press conference half an hour later, is resulting in tentative action in forex — sterling aside — and meek gains in stocks and sovereign debt.
Futures suggest the S&P 500 will add 1 points to 2,075, leaving the Wall Street benchmark 2 per cent below the record high hit at the start of the month.
New York rallied off overnight lows and this is underpinning sentiment across the Atlantic, where the FTSE Eurofirst 300 is adding 0.1 per cent.
The dollar index, which last week hit a 12-year high of 100.39 as investors contrasted imminent Fed tightening with the easing trajectory of its European and Japanese peers, is flat on the day at 99.57.
The dollar’s recent strength has been hurting gold of late, and the bullion is off another $2 to $1,146 an ounce, in line to close at its cheapest since November.
US 10-year Treasury yields are down 1 basis point to 2.05 per cent, while the more policy-sensitive two-year note is up 1bp at 0.68 per cent.
Equivalent maturity German paper is yielding just 0.27 per cent and minus 0.22 per cent, respectively, helping to keep pressure on the euro, which is off 3 pips to $1.0596.
Sterling is 55 pips weaker to $1.4688, a near five-year low, and 10-year gilt yields are slipping 6bp to 1.63 per cent as traders react to weaker than expected labour market data and absorb the latest Bank of England minutes. The government’s last Budget before May’s general election will be revealed at 1230 GMT.
In Asia, Chinese stocks continued to rally as news that property prices fell at a record pace in February only served to boost expectations that Beijing will deliver more stimulus measures.
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The Shanghai Composite jumped 2.1 per cent to a fresh seven-year high as trading volumes surged.
Nevertheless, China’s economic slowdown is playing a big role in the price of global commodities, suppressing base metals and adding to declines for oil, which is under further pressure from a US supply glut.
Copper is down 2 per cent to $5,686 a tonne, Brent crude is off 0.8 per cent to $53.10 a barrel and US-traded WTI crude is down 2.6 per cent to a six-year low of $42.33.
In Tokyo, the Nikkei 225 rose 0.6 per cent to record a fresh 15-year high as the weak yen and Bank of Japan-suppressed bond yields encouraged the buying of stocks. Hong Kong’s Hang Seng advanced 0.9 per cent, tracking the region’s broadly upbeat mood.
