Global Market Mixed As Traders Await FOMC, Italy Budget Passes, US Futures Up In Early Trading

Asian Equities Mixed As Traders Wait On The FOMC

Asian markets were mixed on Wednesday as traders wait on today’s much-anticipated FOMC policy statement. The statement is expected to bring another quarter-point rate hike but that is not what traders are wary of. Recent developments in US economic trends including a slow-down of inflation acceleration and comments from Jerome Powell have led the market to believe this may the last FOMC interest rate increase until late next year.

The CME’s Fedwatch Tool shows market odds are less than 50% for even one more rate hike after today’s if it comes. Some estimates have economic growth slowing over the next twelve months which has raised a chance, however slim, the Fed may lower rates at some point in the year.  

The Chinese Shang Hai Composite led declining indices with a loss of -1.05% while the Korean Kospi led advancing markets with a gain of 0.81%. The Nikkei and Australian ASX both closed with losses, -0.60% and -0.16%, while the Hong Kong-based Heng Seng index closed with a small gain.

Italian Budget Woes Are Over!

Italian budget woes are over, at least for now. The news was announced early this morning that lawmakers in the EU and Italy had reached an informal agreement on Italy’s proposed budget. The budget had been vetoed by the EU early last month on the grounds spending plans violated terms of an agreement made with Italy’s former government. The news, while good, is only one step forward in a country and economic bloc notorious for political upheavals, we haven’t heard the last about this.

Europe’s banking sector was among the top performers, up more than 0.5% at midday, as relief swept through the sector, spurred by the news from Italy. In the UK GlaxoSmithKline surged more than 6% on news it was splitting into two companies and forming a strategic alliance with Pfizer. The split will result in a prescription drug company and one focused on consumer products, which is where the deal with Pfizer was made.

US Futures Point To Rebound, Traders Cautious

US futures trading was pointing at a positive open on Wednesday morning as cautious traders eye the FOMC. The policy release is scheduled for later today and accompanied by new outlook and estimates, a new dot-plot, and a press conference with Jerome Powell. Needless to say, there will be a lot of market-moving information to be sure.

The Dow Industrials were leading in early market action with a gain near 0.70%. The broad market S&P 500 was trading within a few hundredths of that level and the tech-heavy NASDAQ Composite was not far behind. Today’s action is going to be driven in large part by the FOMC, don’t trust any moves until after the policy release and press conference.