Yen rises, stocks mixed ahead of Fed decision: Market Report

(Bloomberg) — The yen rose, recouping most of Tuesday’s losses, amid a largely directionless Asian session as traders debated the size of the Federal Reserve’s likely rate cut. Stocks were mixed.

Most Read from Bloomberg

The Japanese currency rose about 0.8% after falling 1.3% in New York, helping to set up a volatile day for Japanese stocks. The market is currently assuming a slightly more than 50% chance of a half-point rate cut by the Federal Reserve on Wednesday. The central bank is also due to release new quarterly forecasts, and Chairman Jerome Powell is due to hold a news conference.

While most Asian stocks fell, U.S. stock futures rose after the S&P 500 hit a new record high on Tuesday, and European futures were flat. The dollar and U.S. Treasuries were little changed.

“There are more questions than answers about a 25 or 50 basis point rate cut. It feels like a cautious day on the sidelines, waiting for the Fed to decide,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore.

Economists widely expect the FOMC to cut rates by a quarter percentage point to a range of 5% to 5.25%, though a number of experts see a half-point cut. Investors see the odds of a half-point cut as better than expected.

The new quarterly forecasts in the form of a so-called “dot plot” released at the end of the central bank’s two-day meeting will provide further insight into the future path of borrowing costs and the economy.

Traders betting on an expected rate cut by the Federal Reserve risk sharp losses if officials opt to cut rates by a record amount. In some markets, investors are bracing for more easing from local central banks as they wait for the Fed to take more aggressive action to prevent a slowdown.

yen recovery

The yen rebounded from Tuesday’s losses as traders awaited decisions from the Federal Reserve and the Bank of Japan later this week. Bank of Japan Governor Kazuo Ueda and his colleagues are expected to keep interest rates unchanged on Friday and discuss whether conditions are ripe for another rate hike this year.

Mainland Chinese stocks rose after the holiday, shrugging off gains in Hong Kong shares amid calls for massive economic stimulus.

The story continues

Shares of Chinese chip-related companies surged after the country reported a breakthrough in developing home-grown chipmaking equipment. Shares in Shanghai Changjiang Hi-Tech Park Development Co. jumped 10% on the day, while Changchun UB Optotech and Sai Microelectronics also rose.

“The market is expected to remain volatile as investors continue to wait to see if China will roll out more stimulus policies,” said Shen Ming, director at Beijing-based investment bank Chanson & Co. “The impact from other markets such as Hong Kong and the US will be short-lived.”

Oil prices fell after two days of gains as traders weighed signs of rising U.S. inventories, rising tensions in the Middle East and the likely path of the Federal Reserve’s interest rate hike. Oil prices jumped on Tuesday after thousands were wounded in what Hezbollah said was an Israeli attack using pagers in Lebanon.

Main events this week:

• Eurozone CPI, Wednesday

• Fed Rate Decision Wednesday

• UK interest rate decision, Thursday

• US Board of Governors Index, Initial Jobless Claims, Existing Home Sales, Thursday

• FedEx Earnings Thursday

• Japan Interest Rate Decision, Friday

• Eurozone Consumer Confidence, Friday

Some key movements in the markets:

Stocks

• S&P 500 futures were little changed as of 6:46 a.m. London time.

• Japan's Topix index rose 0.1%.

• Australia's S&P/ASX 200 was little changed.

• The Shanghai Composite Index rose 0.2%.

• Euro Stoxx 50 futures fell 0.1%

• Nasdaq 100 futures were little changed.

• Australia's S&P/ASX 200 was little changed.

Currencies

• The Bloomberg Dollar Index was little changed.

• The euro was little changed at $1.1118.

• The Japanese yen rose 0.7% to 141.46 yen per dollar.

• The offshore yuan rose 0.2% to 7.0980 against the dollar.

• The Australian dollar was little changed at $0.6754.

• The pound was little changed at $1.3158.

Cryptocurrencies

• Bitcoin rose 0.2% to $60,234.69

• Ether price fell 1.1% to $2,319.39

Bonds

• The yield on the 10-year US Treasury note was little changed at 3.64%.

• The yield on the 10-year Japanese bond was unchanged at 0.820%.

• The yield on the 10-year Australian bond rose two basis points to 3.85%.

Goods

This story was produced with the help of Bloomberg Automation.

–With assistance from Rob Verdonk.

Most Read from Bloomberg Businessweek

©2024 Bloomberg LP