Markets subdued ahead of Fed policy decision

Cornelia Mascio
Settembre 24, 2017

The Fed is due to announce its decision at 1800 GMT on Wednesday and is widely expected to keep rates unchanged after a two-day meeting but could begin paring its bond holdings, with reductions likely to start in coming months.

According to CME FedWatch, markets are pricing in a more than 50 percent chance of a Fed hike in December, up from around 31 percent as recently as September 8.

"The Fed is going to make sure that the process would stay as smooth as possible and this would likely push them to hold their gradual approach in hiking the interest rates", said Naeem Aslam, chief market analyst with ThinkMarkets.

"There's some concern among investors as to how this will work, and how it will affect long-term rates".

Higher U.S. yields bolstered the greenback, with the benchmark 10-year note yield notching a one-month high of 2.237 percent overnight.

Trump said in a speech to the U.N. General Assembly on Tuesday that the United States will be forced to "totally destroy" North Korea unless Pyongyang backs down from its nuclear challenge.

Gold for December delivery GCZ7, +0.40% edged down by 20 cents to settle at $1,310.60 an ounce, the lowest since August 25, according to FactSet data.

The dollar index, which ranks the greenback versus six other major currencies, fell 0.24 percent.

On Wall Street on Monday, the Dow Jones Industrial Average closed at a record high for the fifth straight session, and the S&P 500 marked its second straight closing record high, as higher U.S. Treasury yields helped lift financial shares.

Higher rates can boost the dollar, in which gold is priced. "That's why financials have found some strength", said Ryan Detrick, senior market strategist for LPL Financial.

Against the USA dollar and the euro, the kiwi dropped to 0.7303 and 1.6439 from an early 2-day highs of 0.7342 and 1.6349, respectively.

Japan's Nikkei stock index ended 2 percent higher after touching its highest levels since late June, catching up to global equities gains and a weaker yen as Tokyo markets reopened after a public holiday on Monday. Australia's S&P/ASX 200 edged up almost 0.1 percent to 5,724.70.

And next year, it's forecasting growth of 1.9 percent for the eurozone, 0.1 percentage point more than previously thought, but below its 2.4 percent projection for the U.S. The big three eurozone economies — Germany, France and Italy — all saw upward revisions.

In the US bond market, yields rose slightly. Oil prices were higher.

OIL: Benchmark U.S. crude added 35 cents to $50.25 per barrel on the New York Mercantile Exchange.

USA crude fell 43 cents to settle at $49.48 a barrel, while Brent declined 34 cents to settle at $55.14.

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