Traders Hold Back Before Fed Decides on Policy: Markets Wrap

Stocks in Asia opened mixed as investors girded for another round of geopolitical tensions after U.S. President Donald Trump threatened to annihilate North Korea. With a highly anticipated Federal Reserve policy decision pending, the dollar traded above its recent lows.

Equity benchmarks fluctuated as markets in Tokyo, Seoul and Sydney began trading. S&P 500 Index futures were little changed after the underlying benchmark climbed for a third day. The Mexican peso slipped after a 7.2 magnitude earthquake struck near Mexico City. The yen was flat. Benchmark crude held below $50 a barrel.

Financial markets remained largely calm on Tuesday as Trump’s speech to the UN did little to alter views on the tensions over North Korea’s nuclear ambitions. Absent any North Korean response, attention turns to Wednesday’s Fed decision, with a focus on plans to start shrinking the central bank’s $4.5 trillion balance sheet.

The fixing of the yuan is also back in focus as investors try to gauge where the People’s Bank of China wants the currency, following a set of weaker-than-expected fixings last week. Read more about the importance of the fixings here.

Terminal subscribers can read more in our Markets Live blog.

What to watch out for this week:

  • Japan’s trade surplus in August was 113.6 billion yen ($1.02 billion) compared to an estimate of 104.4 billion yen as imports and exports had double-digit increases.
  • Reserve Bank of Australia Assistant Governor Luci Ellis speaks in Sydney. 
  • Malaysia August CPI is due Wednesday.
  • The Bank of Japan is predicted to stand pat when it reviews policy Thursday. The BOJ probably won’t reveal when it will unwind stimulus, but could signal determination to keep the yield curve under control.
  • Indonesia and the Philippines are among countries also reviewing monetary policy this week.
  • Brexit strategy is in focus as Theresa May prepares to outline her revised approach on Friday.
  • Campaigning continues in Germany, days before the Sept. 24 election. New Zealand goes to the polls on Sept. 23.

Here are the main moves in markets:

Stocks

  • The Topix index was little changed as of 9:10 a.m. Tokyo time. Australia’s S&P/ASX 200 fell 0.4 percent, while the Kospi index in Seoul rose 0.1 percent. Futures on the Hang Seng Index in Hong Kong were little changed.
  • Contracts on the S&P 500 Index were flat. The main gauge climbed 0.1 percent in the New York session.
  • The MSCI All-Country World Index increased 0.3 percent Tuesday to a record high.
  • The MSCI Emerging Market Index dropped 0.3 percent.

Currencies

  • The Bloomberg Dollar Spot Index increased less than 0.1 percent.
  • The yen was little changed at 111.52 per dollar.
  • The pound was little more than a cent off the year’s high against the dollar after a report U.K. Foreign Secretary Boris Johnson may resign should Prime Minister Theresa May oppose his Brexit demands.
  • The euro was flat at $1.1994, within a cent of the recent high.
  • The Mexican peso was trading at 17.8211 per dollar.

Bonds

  • The yield on 10-year Treasuries rose more than one basis point to 2.24 percent Tuesday.
  • Australian 10-year bond yields was little changed at 2.81 percent.

Commodities

  • Gold futures were at $1,311.56 an ounce after climbing 0.3 percent on Tuesday.
  • West Texas Intermediate traded at $49.82 after falling 0.9 percent on Tuesday, the first retreat in more than a week. 

— With assistance by Jeremy Herron

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