Equities flat ahead of Fed unveiling monetary horizon
Europe’s stock markets wavered yesterday as investor caution prevailed before the Federal Reserve’s latest interest rate call. Frankfurt equities sagged despite a rally for shares in German heavy industry giant ThyssenKrupp, which announced a deal with Indian group Tata to merge their steel operations in Europe.
Thyssenkrupp jumped 3.4 percent to stand at 26.15 euros in Frankfurt afternoon deals following news of the combination to create Europe’s second-largest steelmaker after ArcelorMittal, whose stock was up 1.0 percent at euros in Amsterdam.
The main index in London was flat despite data revealing a surprise surge in British retail sales last month, while Paris stocks edged higher. Wall Street equities also temporized at the open of trading, with the Dow flat.
US stocks added modestly to records early yesterday as oil-linked equities gained ahead of a Federal Reserve policy announcement expected to offer clues on the likelihood of a third 2017 rate hike.
Shares of petroleum-linked companies such as ConocoPhillips and Halliburton rose more than one percent on a bump in oil prices as a two-day Fed meeting resumed. While the Fed is not expected to announce a rate hike, analysts will assess the policy statement and Fed Chair Janet Yellen’s comments during her news conference for signs the odds of a December rate hike have risen.
The Fed is also expected to announce the start of a gradual process to unwind its bondbuying stimulus program. About 15 minutes into trading, the Dow Jones Industrial Average was up a hair at 22,373.75.
The broad-based S&P 500 won 0.1 percent to 2,508.57, while the tech-rich Nasdaq Composite Index advanced 0.1 percent to 6,464.89. All three major indices finished at records Tuesday.
Retailer Bed Bath & Beyond plummeted 14.8 percent after reporting that second-quarter earnings tumbled 43.7 percent from the yearago period to $94.2 million. Comparable store sales fell 2.6 percent. General Mills dived 6.3 percent after reporting first-quarter earnings per share of 71 cents, five cents below analyst expectations.
Adobe Systems lost 4.7 percent after reporting that third-quarter earnings rose 55 percent to $419.6 million. Ford fell 0.3 percent after announcing it was trimming production at five plants in Mexico and the United States due to low demand for some cars.
Focus was on 1800 GMT when the US Federal Reserve announces the outcome of its latest monetary policy meeting. “The Fed trumps all else, and with hours to go until the next decision, caution reigns supreme,” said IG analyst Chris Beauchamp.
“Today’s Fed meeting provides us with enough to pore over for weeks to come. “Details on balance sheet reduction will be of interest, but crucially the committee will extend its rate outlook in 2020, and this could give us a good sense of the end-point for the interest rate in this current tightening cycle,” he added. A third successive record performance on Wall Street, fanned by speculation about Trump’s economic agenda, was not enough to induce much buying elsewhere.
Foreign exchange markets saw little movement, although the Mexican peso was down after an earthquake killed more than 200 people. While Fed policymakers are not expected to raise interest rates, the post-meeting statement and comments from chair Janet Yellen are the main focus as traders hope for a timetable on winding down its crisis-era bond-buying stimulus.
Yesterday’s announcement comes amid broader moves by global central banks to tighten monetary policy in the face of rebounding world economic growth, dealers said.
‘Money is still cheap’
“We expect steady Fed policy through to the end of the year,” Rabobank analyst Jane Foley told AFP. “All central banks would like to regain more ammunition in preparation of the next downturn, so in this context there is a universal desire of central banks to have higher interest rates-but not at any cost clearly.” She added: “When the low levels of bond yields is taken into account, money is still very cheap. This factor, combined with good levels of global growth, is a good environment for stocks.”
Asian equities earlier moved tentatively after US President Donald Trump threatened to “totally destroy” North Korea if it threatened the US or its allies. — AFP