Stocks inch up, dollar weakens as Fed focus grows

23 Septembre, 2017, 02:36 | Auteur: Aubrey Nash

European government bond yields are also on the rise in the wake of the Fed's Wednesday meeting, during which Chairwoman Janet Yellen suggested that economic growth was strong enough to weather at least one more rate hike this year and three over the course of 2018, taking the probability of a December increase past 70%, according to the CME Group's Fed Watch tool.

There was relief the weekend passed with no new provocation by North Korea, though Pyongyang's nuclear ambitions will be centre stage when US President Donald Trump addresses world leaders at the United Nations on Tuesday. That action will start a gradual reversal of the three rounds of quantitative easing the Fed pursued between 2008 and 2014 to stimulate the economy after the 2007-2009 financial crisis and recession.

The dollar on Tuesday eased against a basket of currencies but hovered near an eight-week high against the yen as US treasury yields continued to climb after signs of firming inflation.

Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York, said "the primary reason U.S. yields are creeping up is that thinking about it clearly, the market has decided that the Fed is unlikely to change the December 2017 dot - still saying they expect one more rate hike in 2017".

At the end of its two-day meeting on Wednesday, the Federal Reserve is widely expected to announce it will begin to reduce its enormous bond portfolio, which reached $4.5 trillion.

The Australian dollar was the biggest mover on the day, falling 1.1 percent to $0.7941.

Equally, if the central bank announced the unwinding of its balance sheet to start as early as Oct. 1, the dollar could rally, Detrick added.

On Friday, the benchmark S&P 500 index closed at a record high, hitting the 2,500 level for the first time. Hong Kong, where monetary policy is linked to that of the United States, slipped 0.1 per cent while Sydney shed one per cent.

"Gold prices also came under some selling pressure, with investors dismissing geopolitical risks and instead focusing on the possibility of rate hikes from central banks", ANZ analyst Daniel Hynes said in a note.

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

Stateside, the Dow Jones industrial average rose 0.18 percent, or 39.45 points, to close at a record 22,370.80, the S&P 500 advanced 0.11 percent, or 2.78 points, to end at 2,506.65 and the Nasdaq tacked on 0.1 percent, or 6.68 points, to finish the session at 6,461.32.

Brent crude futures rose $1.06, or 1.9 percent, to $56.20 a barrel by 12:19 p.m. EDT (1619 GMT), while U.S. West Texas Intermediate (WTI) crude futures gained 91 cents, or 1.8 percent, to $50.39.

The pan-European FTSEurofirst 300 index lost 0.18 percent. Gold in particular! Get our Report (value of $49) for FREE. Tokyo's Nikkei surged 2 percent overnight.