Yen rises, stocks are mixed as Fed decision approaches: Markets close

(Bloomberg) — The yen rallied, clawing back much of Tuesday’s losses amid a largely directionless Asian session as traders debated the size of a potential Federal Reserve interest rate cut. Stocks were mixed.

Bloomberg’s most read

Japan’s currency rose as much as 0.8 percent after sinking 1.3 percent in New York, helping to create a big day for Japanese shares. Market defaults currently put the chance of a half-point Fed rate cut on Wednesday at just over 50%. The central bank will also release new quarterly forecasts and Chairman Jerome Powell will hold a news conference.

While most Asian stocks were lower, U.S. stock futures rose after the S&P 500 hit a fresh record on Tuesday and European futures were flat. The dollar and treasuries were both little changed.

“There are more questions than answers for a cut of 25 or 50 basis points,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore. “Looks like a cautious day on the bench, on the sidelines, as the Fed is expected.”

Economists widely anticipate the Federal Open Market Committee will cut rates by a quarter point to a range of 5 percent to 5.25 percent, though a number expect a half-point move. Investors see better odds than even a half-point adjustment.

Fresh quarterly projections 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 way forward for borrowing costs and the economy.

Traders who are locked into record bets on the Fed’s expected rate cut risk big losses if officials opt for a standard rate cut. In some markets, investors are poised for further easing from local central banks in anticipation of the Fed taking more aggressive steps to prevent a slowdown.

The rebound of the Yen

The yen bounced back from Tuesday’s losses as traders awaited a decision from the Fed and also the Bank of Japan later this week. BOJ Governor Kazuo Ueda and his colleagues are set to keep the benchmark on hold on Friday and discuss whether conditions are met for another hike this year.

Mainland Chinese shares rose after a holiday break, shrugging off gains in Hong Kong shares amid calls for major economic stimulus.

The story continues

Chinese chip stocks rose after the nation claimed progress in developing production chip-making equipment. Shanghai Zhangjiang High-Tech Park Development rose by the daily limit of 10 percent, while Changchun UP Optotech and Sai Micro Electronics also rallied.

“The market is expected to continue to fluctuate as investors are still waiting to see if China will implement more stimulus policies,” said Shen Meng, director at investment bank Chanson & Co in Beijing. “The impact of other markets such as Hong Kong and the US will be short-lived.”

Oil edged lower after a two-day gain as traders weighed signs of higher U.S. inventories, rising tensions in the Middle East and the likely course of the Federal Reserve’s exchange rate hike. The violence escalated on Tuesday after thousands of people were injured in what Hezbollah called an attack by Israel involving pagers in Lebanon.

Key events this week:

• Euro zone CPI on Wednesday

• Fed rate decision on Wednesday

• UK rate decision on Thursday

• US US Conf. Council Lead Index, Initial Jobless Claims, US Existing Home Sales, Thursday

• FedEx earnings on Thursday

• The decision on the rate of Japan, Friday

• Eurozone consumer confidence, Friday

Some of the main movements in the markets:

Stocks

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

• Japan’s Topix rose 0.1%

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

• Shanghai Composite 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

Coins

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1118

• The Japanese yen rose 0.7 percent to 141.46 per dollar

• The offshore yuan rose 0.2 percent to 7.0980 per dollar

• The Australian dollar was little changed at $0.6754

• The British pound was little changed at $1.3158

Cryptocurrencies

• Bitcoin rose 0.2% to $60,234.69

• Ether was down 1.1% at $2,319.39

BONDS

• The 10-year Treasury yield was little changed at 3.64%

• Japan’s 10-year yield was unchanged at 0.820%

• Australia’s 10-year yield rose two basis points to 3.85%

commodities

This story was produced with the help of Bloomberg Automation.

–With help from Rob Verdonck.

Bloomberg Businessweek’s most read

©2024 Bloomberg LP