Investors remain in limbo as they await the FED’s approval of plans to scale back its bond-buying programme. Asian equities remain mixed, with earnings flat to slightly down.
Global equities were slow on Monday and Tuesday, while currencies held in tight ranges. Investors are nervous as they await the Federal Reserve‘s decision on its bond-buying policy, which could set the tone for future risk appetite.
The Reserve Bank of Australia is in the spotlight on Tuesday as it took a step towards unwinding extraordinary pandemic stimulus policies by dropping its ultra-low target for required yields. The spotlight is now on the FED as well as the Bank of England who are holding meetings to do just that this week.
Asian equities were mixed overall. Outside of Japan, the MSCI Asia Pacific Equity Gauge was flat, while the Japanese Nikkei fell 0.4%. Chinese stocks fell 0.6%, led by financials and consumer companies even as the country’s cabinet pledged more support for the consumer services sector, while technology stocks pushed Hong Kong’s Hang Seng Index up 0.6%.
Across the Pacific in the US, Wall Street hit record highs overnight on gains in energy stocks and Tesla. The Dow Jones Industrial Average rose 0.26%, while the S&P500 and Nasdaq Composite gained 0.18% and 0.63% respectively.
The FED is expected to approve plans on Wednesday to reduce its $120 billion monthly mandatory purchase program, while investors will also focus on comments on interest rates and the persistence of the recent surge in inflation.
“The elephant in the room is headline and core inflation, which is higher than the Fed had anticipated,” said Steve Englander, head of G10FX at Stardard Chartered.
In commodity markets, a further 4% drop in Chinese coal prices on Tuesday pushed them 50% below last month’s record high.
Oil prices were little changed as expectations of strong demand and a belief that a key group of producers will not turn on the taps too quickly helped reverse initial losses caused by the release of fuel reserves by China, the world’s biggest energy consumer.
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