Global stocks steady ahead of Federal Reserve decision

Global stocks were steady ahead of a US monetary policy decision and as Congress struggled to reach a deal on extending the country’s coronavirus relief package.

The European benchmark Stoxx 600 edged 0.1 per cent lower on Wednesday in early trading. Frankfurt’s Xetra Dax was lower by a similar amount, while the FTSE 100 in London was flat.

Analysts at SEB, a Swedish bank, said investors were waiting for an announcement by the Federal Reserve on Wednesday on its latest monetary policy meeting.

Investors do not expect the Fed to resort to negative interest rates but some suspect it could turn to unconventional measures such as yield curve control or setting upper limits on short-term Treasury yields.

“In addition to the Fed announcement, the market continues to be characterised by risks due to the continuous spread of [Covid-19] infections and its effects on economies,” SEB said.

Hopes for a rebound in the world’s biggest economy have been hit by a resurgence in Covid-19 cases and doubts over the extent of additional support measures.

The US reported 1,121 coronavirus deaths on Tuesday, taking the seven-day average death toll above 1,000. The $1tn pandemic relief package proposed by Senate Republicans has encountered intense resistance from Democrats, who oppose cutting enhanced unemployment benefits from $600 a week to $200.

“Furloughed workers who were relying on federal money . . . are facing a pay cut,” said Robert Carnell, head of Asia-Pacific research at ING. “The only question is, how much of a cut?”

Futures markets tipped the S&P 500 to open 0.1 per cent higher when Wall Street begins trading later on Wednesday.

Overnight on Wall Street, weak earnings from consumer bellwethers McDonald’s and Starbucks — which posted its first quarterly loss in seven years — fuelled concerns over America’s economic recovery from the pandemic.

Investors await clues on how industrial companies have coped during the pandemic crisis with another slew of earnings due on Wednesday including Boeing, GE and GM.

In the Asia-Pacific region, Japan’s Topix index was down 1.3 per cent on Wednesday afternoon while equities in Australia and South Korea were little changed. China’s CSI 300 benchmark of Shanghai- and Shenzhen-listed stocks jumped 2.1 per cent and Hong Kong’s Hang Seng rose 0.5 per cent.

Traders in China said the stock market’s gains were driven by renewed interest from retail investors. State media last week warned that stocks were rising too quickly.

Gold edged back from all-time highs and the US dollar held near multiyear lows, with volatility increasing ahead of the Federal Reserve’s interest rate decision on Wednesday.

The precious metal slipped 0.2 per cent to $1,956.04 per troy ounce. Gold, viewed by investors as haven during times of uncertainty, climbed as much as 2 per cent on Tuesday to a record high of $1,980.57.

The dollar hovered near a two-year low, with the index that measures the US currency against a basket of its peers virtually unchanged.

Oil prices rose but remained rangebound with Brent crude, the international benchmark, up 0.4 per cent at $43.39 per barrel.


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