Tuesday 08:30 BST. Stock markets, forex and fixed income are trading cautiously ahead of highly-anticipated monetary policy decisions by the Bank of Japan and Federal Reserve.
After a mixed Asia-Pacific session, the pan-European Stoxx 600 is down 0.1 per cent as banks ease back and energy groups come under pressure on softer oil prices.
US index futures suggest the S&P 500 will add 0.3 per cent to 2,145. The Wall Street barometer finished Monday’s session barely changed as traders seemed reluctant to make bold bets ahead of Wednesday’s central bank double bill.
Fixed income futures markets place just a 20 per cent chance that the Fed will raise interest rates by 25 basis points, according to calculations by Bloomberg. So traders are keen to hear whether the central bank’s accompanying comments give additional clues to the likely timing and pace of future monetary tightening.
In the meantime, the yield on the 10-year US Treasury is steady at 1.70 per cent and the dollar index, which tracks the buck against a basket of its peers, is down 0.2 per cent at 95.65.
Benchmark German Bund yields are off only 1 basis point, offering a yield of just 0.01 per cent, after Japanese 10-years fell 2 basis points to minus 0.05 per cent as investors tweaked positions ahead of the BoJ’s policy announcement.
Unlike the Fed, where the decision is to either leave rates on hold or lift them, there is a wide range of expectations about what the BoJ might do, which could lead to some messy trading after the meeting, analysts reckon.
The BoJ is also expected to release a review of its quantitative easing and negative interest rate efforts alongside its policy decision.
“Expectations are all over the place,” said Frederic Neumann, co-head of Asian economics at HSBC.
While suggestions include tapering asset purchases, holding rates, cutting rates deeper into negative territory, marginal tweaks and “another bazooka” — more aggressive policy action — Mr Neumann said a sober perspective suggested that “the BoJ is at best going to tinker with its existing framework, not introduce a major overhaul”.
He highlighted that the recent run of economic data have not been overly bad, but price pressures remained soft and investors appeared “to have growing doubts about the BoJ’s ability to scale up, or even just to sustain, its current monetary easing”.
The yen is just 0.2 per cent firmer at ¥101.69 and the Nikkei 225 stock average returned from a long weekend to slip less than 0.2 per cent. Sentiment was not helped by a sharp fall in Takata shares amid reports that some of the bidders for the troubled airbag manufacturer were weighing bankruptcy as an option.
Australia’s S&P/ASX 200 added 0.2 per cent, even though TPG Telecom fell more than 20 per cent after the longtime market darling’s earnings guidance for the 2017 financial year fell short of analysts’ forecasts.
South Korea’s Kospi rose 0.5 per cent despite Hanjin Shipping losing nearly 9 per cent after the indebted shipper was ordered by a court to return the ships it charters to their owners and sell many of its own vessels.
Hong Kong’s Hang Seng was down 0.2 per cent, while on the mainland the Shanghai Composite lost 0.1 per cent and the tech-focused Shenzhen Composite also eased 0.1 per cent.
In commodities, gold, which is sensitive to monetary policy expectations, is up 0.2 per cent at $1,316 per ounce.
Hopes that a deal among major oil producers to stabilise global output could be on the horizon buoyed oil prices at the start of the week, but those gains are being pared. Brent crude, the international benchmark, is down 0.6 per cent at $45.66 a barrel while West Texas Intermediate dips 0.8 per cent to $42.97.
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