MARKET WRAPS
Watch For:
Germany PPI; UK PPI, CPI; trading updates from M&G, Dechra Pharmaceuticals
Opening Call:
Shares may open in mixed territory in Europe on Wednesday, with investors warily watching the interest rates policies from the Federal Reserve, Bank of England and Bank of Japan this week. In Asia, stock benchmarks fell; Treasury yields were barely changed after earlier gains; the dollar was steady; while oil and gold declined.
Equities:
European stocks face a mixed open on Wednesday, as a bumper week for central banks could shake global markets in the coming days.
Along with Wednesday's U.S. Fed meeting, decisions from the Bank of England, Bank of Japan and Turkey's central bank are also on tap.
The U.S. central bank is widely expected to leave borrowing costs on hold, but could still rattle markets by leaving the door open for more interest-rate hikes at future meetings.
Traders are wary about accompanying guidance on any future rate rises amid stubborn inflationary pressures, a concern that sees 10-year benchmark Treasury yields holding near their highest level since 2007.
Markets "are looking for certainty and the Fed doesn't want to give it to them," Raymond James said.
Forex:
The dollar was consolidating in Asia ahead of the Federal Open Market Committee meeting outcome later in the day.
The markets will probably focus on three key aspects, MUFG Bank said.
First is the tone of Fed Chair Jerome Powell's press briefing and whether he gives any indication for policy moves this year, it said.
Second is the dot plots, and whether and by how much rate-cut projections are reduced for 2024 and beyond, MUFG Bank said.
Third is the summary of economic projections, it added.
Wednesday's Fed decision is widely expected to be a hold. The Fed is also expected to repeat the message that it remains data-dependent and another hike is possible, although markets are mostly pricing rates staying where they are until cuts start by mid-2024.
Bonds:
Treasury yields were steady after earlier reaching multi-year highs ahead of the Fed decision.
Yields have crept up in recent weeks as rising oil prices and stronger-than-expected U.S. economic data raised concerns about revived inflationary pressures.
The FOMC is widely expected to hold rates and remain data dependent, while keeping alive the possibility of another rate increase this year.
Markets are pricing rates staying at the current 5.25%-5.5% range for the next several months, before an easing cycle starts.
Deutsche Bank said "it will be important to consider the degree of underlying shifts in the dots" and Chair Powell's remarks.
"The Fed's message will be that higher policy rates remain on the table until the economy visibly slows and inflation is closer to 2%. We doubt that there will be an unconditional commitment to raising rates but the FOMC will signal readiness to do so if needed," said Standard Chartered Bank.
"We expect a cut in Q1-2024 because we expect the U.S. economy to slow, but the FOMC will likely want the slowing to be visible before opening the door to easing," it said.
Energy:
Oil prices retreated in Asia as investors await the Fed rate decision due later in the day.
"If the Fed signals higher for longer is here to stay and that hard landing risks are rising, that could give one last major push for the dollar, which might bring down oil prices," Oanda said.
Investors have been looking past worries about China's economic growth and a sluggish economy in Europe to push the commodity higher amid ever-tightening supplies, as Russia and Saudi Arabia have each curbed production.
"The Saudi appetite to withhold oil from the market, supported by Russia maintaining a certain level of export constraint, points to higher prices in the short term, all else equal," Citi said.
However, $90 prices "look unsustainable given faster supply growth than demand growth," excluding Saudi Arabia and Russia, it said. "Higher prices in the near term could make for more downside for prices next year."
Metals:
Gold edged lower ahead of the Fed's policy rate decision.
Rising energy prices are stoking fears of the Fed rates remaining higher for longer and weighing on the precious metal, ANZ said.
"A hawkish decision would be decidedly bearish for gold...while a dovish surprise would support a run beyond $2,000" for gold, said Sevens Report Research,
"The focus for gold traders will start with the Fed, but then quickly shift to the BOE and BOJ policy decisions," Oanda said.
If most central banks in the developed world are done raising rates, that would be good news for gold, it added.
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Copper rose, buoyed by signs of China demand.
Many commodity markets have stayed tight, partly due to supply issues but demand, particularly from China, has been steady, BofA Global Research said.
Also, 'traditional' sectors in China such as property are still important to the government, which suggests more potential support ahead for mined commodities if recent stimulus has an impact, BofA added.
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Iron ore prices were higher, reversing losses in the previous two sessions.
Beijing's recent stimulus measures boosted investor sentiment on the ferrous metal and lifted prices, GF Futures said.
Steel mills' inventory levels and stock-rebuilding plans will likely be in focus, as it will affect demand for iron ore, a key steelmaking ingredient.
TODAY'S TOP HEADLINES
Fed Debates When to Stop Raising Rates. What to Watch at Wednesday's Meeting
Federal Reserve officials are set to hold interest rates steady at their meeting Wednesday while debating what it would take for them to lift borrowing costs again this year.
Their anticipated decision would mark the second time in six policy meetings this year that the Fed hasn't raised rates, slowing the pace of increases to allow more time to study their effects on the economy and inflation.
Britain's Pitch to Investors: We're Boring Now-and That's Good
LONDON-It isn't a political slogan that would win many votes: Make Britain Boring Again.
But for the first time in nearly a decade-after nonstop drama from Brexit to the colorful antics of Boris Johnson-politics in Britain is eliciting yawns rather than headlines. And that's good news for the world's sixth-biggest economy.
Ukrainian Tactics Put Russia on the Defensive in the Black Sea
ODESA, Ukraine-Commercial vessels have entered Ukraine's main port of Odesa without asking permission from Russia for the first time since the war began-showing just how much the balance of power has changed in the Black Sea.
By imposing an asymmetrical war that relies on domestically produced naval drones and missiles, and that targets Russians ships in their own home bases, Ukraine has eroded much of Russia's vaunted naval superiority. Now, it is taking the battle to Russia itself.
China Keeps Benchmark Lending Rates Unchanged
China's benchmark lending rates were kept unchanged, as expected, following a hold of policy rates earlier this month, after a run of upbeat August data showed signs of stabilization in the world's second-largest economy.
The one-year loan prime rate was held steady at 3.45% while the five-year LPR was unchanged at 4.2%, the People's Bank of China said Wednesday. The loan prime rates are calculated monthly based on the interest rates that 18 designated commercial banks charge their best clients.
Biden, Zelensky Urge U.N. Members to Stand Up Against Russian Aggression
UNITED NATIONS-President Biden and Ukrainian President Volodymyr Zelensky called on their counterparts to defend the idea that powerful nations can't seize territory from their neighbors, part of a broad appeal aimed at isolating Russia on the world stage.
In an address to the U.N. General Assembly on Tuesday, Biden said if the U.N. abandoned its principles "to appease an aggressor, can any member state in this body feel confident that they're protected?"
Russian Court Declines to Consider WSJ Reporter Evan Gershkovich's Detention Appeal
A Moscow city court declined to consider jailed Wall Street Journal reporter Evan Gershkovich's latest appeal against his pretrial detention, citing procedural irregularities, according to the court's website.
The appeal was withdrawn from consideration, the court said. It didn't specify the nature of the procedural violations, but said the irregularities were to be addressed. It couldn't be determined where the irregularities originated.
Libya Storm's Severity Caused in Part by Climate Change, Scientists Say
Human-caused climate change caused a 50% increase in heavy rainfall over the Mediterranean that led two dams in Libya to collapse, killing thousands of people and creating a massive humanitarian disaster, according to a group of international climate change scientists.
The scientists from the World Weather Attribution group said greenhouse-gas emissions made heavy rainfall 50 times more likely in Libya when Storm Daniel hit the Mediterranean early this month. The impact of climate change combined with Libya's weak infrastructure and history of conflict make the impact of the storm even more deadly. The report suggests that underdeveloped countries like Libya are at greater risk of harmful impacts due to climate change.
Boeing Raises China Plane Demand Forecast on Recovering Domestic Travel
Boeing raised its forecast of commercial airplanes that China needs over the next two decades thanks to the country's economic growth and recovery in domestic air traffic.
The U.S. plane maker said Wednesday in its annual 20-year forecast that China will need 8,560 new commercial airplanes through 2042, up from the 8,485 forecast last year.
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Expected Major Events for Wednesday
06:00/UK: Aug UK producer prices
06:00/UK: Aug CPI
06:00/EU: Aug New Passenger Car Registrations in Europe statistics (EU27 + EFTA3)
06:00/GER: Aug PPI
06:00/SWE: Aug Labour Force Survey
(MORE TO FOLLOW) Dow Jones Newswires
09-20-23 0015ET
