BLBG: Dollar Gains, Gold Declines Before Fed Policy Decision
The dollar strengthened and gold fell for a third day while U.S. stocks were little changed before a Federal Reserve policy decision. Russian stocks fell as the nation pushed on with the annexation of Crimea.
The dollar strengthened against 14 of its 16 major peers at 9:33 a.m. in New York, rising 0.1 percent against the yen and the euro. The Standard & Poor’s 500 Index fell less than 0.1 percent after the gauge closed within six points of a record yesterday. The Stoxx Europe 600 Index rose 0.1 percent. Benchmark 10-year Treasury yields rose 1 basis point to 2.69 percent. Russia’s Micex Index of equities lost 0.2 percent, snapping a two-day rally. Gold dropped 1.1 percent.
The Fed will press on with cuts to its bond-buying program and switch to qualitative guidance for assessing interest rates, according to economists surveyed by Bloomberg before the Fed’s Open Market Committee two-day meeting ends today. The U.S. and Europe prepared to ratchet up sanctions on Russia as President Vladimir Putin made the annexation of Crimea official.
“Today really comes down to the Fed and what they are going to say,” Richard Sichel, chief investment officer at Philadelphia Trust Co., said in a telephone interview. He helps oversee $2 billion. “We had a nice market yesterday and we think that we won’t see a move in a dramatic direction this morning. The market will tread water until this afternoon.”
Photographer: Kiyoshi Ota/Bloomberg
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The Fed will further scale back asset purchases today, reducing purchases by $10 billion for the third time, according to economists surveyed by Bloomberg March 14-17. Policy makers will scrap a 6.5 percent unemployment-rate target in favor of a range of economic indicators, 76 percent of the economists said.
Target Rate
Fed officials have said they will probably hold the central bank’s target interest rate near zero “well past the time” that unemployment falls below 6.5 percent, “especially if projected inflation” remains below its longer-run goal of 2 percent.
Fed Chair Janet Yellen said last month the U.S. economy was strong enough to withstand measured reductions to the central bank’s monthly bond purchases. Three rounds of Fed stimulus have helped push the S&P 500 up 177 percent from a 12-year low, as U.S. equities enter the sixth year of a bull market that started March 9, 2009.
The S&P 500 advanced 1.7 percent in the last two days as Russia pledged not to seek territory beyond Crimea. The U.S. and Europe are moving to increase sanctions on Russia after Putin signed an accord setting in motion Crimea’s accession to Russia. With visa bans and asset freezes on Russian officials failing to sway Putin, European Union leaders will meet tomorrow to consider “additional and far-reaching consequences.”
Europe Shares
The Stoxx Europe 600 added 0.1 percent after it jumped 1.8 percent in the past two days, rebounding from its biggest weekly loss since January. The number of shares changing hands today in Stoxx 600-listed companies was 38 percent above the 30-day average, according to data compiled by Bloomberg.
Bayerische Motoren Werke AG advanced 7.4 percent after the world’s biggest maker of luxury autos forecast “significant” gains in 2014 profit. Inditex SA (ITX) gained 4.2 percent after the Spanish owner of the Zara clothing chain reported rising revenue in the first six weeks of the fiscal year and said it will start online sales in more markets.
Moscow’s Micex index dropped 0.2 percent, after rallying 8 percent in the previous two days. The ruble climbed 0.9 percent to 35.92 against the dollar, the highest since Feb. 28. Ukraine’s hryvnia weakened 1.5 percent to 10.17 per dollar.
The dollar rose 0.1 percent to 101.54 yen after falling 0.3 percent yesterday. The U.S. currency gained 0.1 percent to $1.3914 per euro. The euro was little changed at 141.29 yen.
U.K. Employment
The pound advanced after the Bank of England said there’s risks of further gains in the currency and a government report showed the jobless rate was near a five-year low. The pound added 0.2 percent to $1.6627 and advanced 0.3 percent to 83.68 pence per euro.
The U.K. economy will grow 2.7 percent this year, more than previously forecast, Chancellor of the Exchequer George Osborne said as he set out his penultimate budget before the 2015 election.
Gold fell 1.1 percent to $1,344.7 an ounce. U.K. natural gas, the European Union’s benchmark contract, dropped for a third day, falling 2.1 percent to 56.76 pence a therm. Europe gets about a third of its natural gas from Russia, half of it through Ukraine.
The Shanghai Composite Index fell 0.2 percent as Chinese developers extended declines after the collapse of a private developer spurred concern the industry may face defaults.
‘Emergency Meeting’
China’s central bank said it didn’t participate in an “emergency meeting” on the collapse of Zhejiang Xingrun Real Estate Co., a developer with 3.5 billion yuan ($565 million) of debt. The failure to pay back debts comes two weeks after the country saw its first onshore bond default and coincides with efforts by the government to reduce risks in the financial system.
“The manner in which the Chinese authorities resolve these defaults will have important implications on the industry,” Fitch Ratings Ltd. analysts Andy Chang and Kalai Pillay said in a note today. “We believe the authorities will force shareholders and some of the lenders, especially from the non-traditional sectors, to realize their losses.”
China’s yuan slid below 6.20 per dollar for the first time since April as the central bank cut the currency’s fixing. The yuan fell 0.07 percent to close at 6.1965 per dollar in Shanghai, China Foreign Exchange Trade System prices show. The currency touched 6.2040 earlier, the lowest since April 8.
To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Shelley Smith in London at ssmith118@bloomberg.net
To contact the editors responsible for this story: Stuart Wallace at swallace6@bloomberg.net; Lynn Thomasson at lthomasson@bloomberg.net Jeff Sutherland
