Wednesday, January 19

Mixed stocks, Treasuries rise ahead of Fed minutes: markets close


Stocks were mixed on Wednesday and Treasury yields declined as traders weighed the economic risks of tighter monetary policy as they awaited key US data as well as the latest minutes from the Federal Reserve.

MSCI Inc.’s Asia-Pacific stock indicator fell for a third day, undermined by Japan. US futures fluctuated and European contracts rose. Energy and finance helped the S&P 500 profit overnight, while the Nasdaq 100 extended a slide. A host of reports on US economic activity and cost of living will be released later.

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A rise in Treasuries unpacked much of their overnight decline. The prospect of the Fed reducing stimulus more quickly to combat price pressures has dampened bond market inflation expectations, although historically they remain high.

New Zealand’s currency plunged after the nation raised interest rates to 0.75% to curb price pressures, a smaller move than some expected. The central bank projected benchmark borrowing costs of 2% by the end of 2022.

Damping inflation is now center stage for policymakers, posing a test for markets as the ultra-lax monetary environments of the pandemic era tighten. Data from the US and Fed minutes will give investors a reading on price pressures and the economic recovery, which could affect the markets.

A key topic for the minutes would be “discussions of criteria for faster reduction in asset purchases,” Carol Kong, a strategist at the Commonwealth Bank of Australia, wrote in a note. Inflation trends suggest that the Fed should begin to adjust earlier than is currently signaled, Kong added.

Oil earned as a planned coordinated release of strategic reserves by the US and other nations fell short of expectations. Gold gained slightly but is still under pressure from higher yields.

Here are some of the key events this week:

  • US FOMC Minutes, Consumer Income, Wholesale Inventories, New Home Sales, GDP, Initial Jobless Claims, US Durable Goods, University of Michigan Consumer Sentiment. All wednesday
  • Bank of Korea policy decision on Thursday
  • US Thanksgiving: US Stock and Bond Markets Closed Thursday
  • Bank of England Governor Andrew Bailey speaks with Mohamed El Erian at a Cambridge Union event. Thursday

Some of the main movements in the markets:

Stocks

  • S&P 500 futures were little changed at 6:53 am in London. The S&P 500 rose 0.2%
  • Nasdaq 100 futures were up 0.2%. The Nasdaq 100 fell 0.5%
  • Japan’s Topix Index down 1.2%
  • South Korea’s Kospi lost 0.1%
  • Australia’s S & P / ASX 200 Index fell 0.2%
  • Hong Kong’s Hang Seng Index rose 0.5%
  • China’s Shanghai Composite Index rose 0.1%
  • Euro Stoxx 50 futures rose 0.3%

Currencies

  • The Japanese yen was at 114.93 to the dollar, up 0.2%.
  • The offshore yuan was at 6.3884 to the dollar.
  • The Bloomberg Dollar Spot Index was flat
  • The euro was at $ 1.1245

Captivity

  • The 10-year Treasury yield fell three basis points to 1.63%.
  • The yield on Australia’s 10-year bonds was 1.86%.

Raw Materials

  • West Texas Intermediate crude was at $ 78.89 a barrel, up 0.5%
  • Gold was at $ 1,793.09 an ounce, up 0.2%.

© 2021 Bloomberg


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