Markets Pause As Fed Meets, Trade-Related Optimism Grows, BOJ To Stimulate Industrial SectorMarkets pause in wait as the FOMC meeting progresses. The statement is due out today at 2 PM and could alter the course of U.S. monetary policy.
The U.S. Market Is Flat As Trader Wait On The FOMC
The U.S. futures are indicating a flat open on Wednesday as traders wait on today’s FOMC statement. The committee is not expected to alter monetary policy but it is expected to alter the policy statement. The words patience and references to possible tightening are likely to be removed in favor of phrasing that opens the door to a rate cut next month.
The policy statement release will be followed by a press conference at which Jerome Powell will face tough questions because of recent comments from Donald Trump. President Trump has been ramping up his anti-Powell rhetoric in an effort to force an interest rate cut. The odds of a cut in July stand at 83%, the odds of three cuts by December are about the same.
Yesterday the market got a big boost of trade-fueled optimism when Trump revealed he’d had contact with Chinese President Xi. Trump says they had an extended phone call discussing many things one of which was their meeting at the G-20. The G-20 meeting is June 28-29 in Osaka, Japan, and the two leaders are planning on having a talk. Market watchers should not expect a deal to be made at this meeting but one may come later this year.
European Markets Recover Early Losses
European markets were mostly flat at midday after posting big losses in the early part of the day. The move comes a day after the major indices saw big gains driven by Trump-fueled optimism over trade. The DAX is now trading just below an eight-month high and indicated higher. The move, along with similar ones in the CAC and FTSE, is aided by a dovish pledge of stimulus from the ECB that should soon result in action. If the expectation for the same from the FOMC is fulfilled the EU indices could move up to new highs.
The Utility sector led the early losses with declines of -1.0%. The midday rebound was led by the Automobile sector which rose an average of 0.90%. Shares in the sector were supported by news the Renault-Fiat deal may be revived. In Brexit news, the field of contenders for Theresa May’s spot as Prime Minister is now five and euroskeptic Boris Johnson retains his lead. Meanwhile, UK CPI came in at 2.0% YOY and as expected.
Asian Markets Pop On Trade Hopes
The Asian markets closed solidly higher on Wednesday after trade hopes were lifted by Donald Trump. The Hong Kong Hang Seng led the advance with a gain of 2.55% with shares of most index heavyweights moving up. The Japanese Nikkei advanced 1.75% with shares of Japan Display jumping more than 10%. The WSJ reports that Apple may into helping the company out and that bodes well for its long-term success. Despite this, the BOJ announced the Japanese Industrial Sector is in recession. There is no word yet on plans for stimulus but some action is likely to happen soon. The Shanghai, Kospi, and Australian ASX all advanced 1.00% to 1.25%.