Stocks mixed ahead of Fed, euro gains, oil rises: Markets wrap

Bloomberg.- Equity markets were mixed on Tuesday, the dollar fell and Treasuries edged higher before as the Federal Reserve began a two-day meeting and investors awaited Donald Trump’s speech to the United Nations.

The S&P 500 Index churned near an all-time high, stuck in one of the tightest ranges in decades. The CBOE Volatility Index slumped below 10. Europe’s equity benchmark followed many Asian peers lower, while Japanese shares surged after a holiday.

The pound swung before jumping after a report Foreign Secretary Boris Johnson may resign should Prime Minister Theresa May oppose his Brexit demands. The euro headed for a fourth daily gain. Most government bonds rose, though many moves were muted. Benchmark WTI crude rose above $50 per barrel.

Investors could be forgiven for avoiding any major new positions in the wake of recent equity gains and in the buildup to the Fed decision. They’ll be looking for clues from policy makers on the chances of further interest-rate increases this year and for details on when they’ll begin unwinding part of the Fed’s $4.5 trillion balance sheet.

“We are not overly concerned about” the Fed’s quantitative-tightening plans, Merrill Lynch and U.S. Trust head of fixed-income strategy Matthew Diczok told Bloomberg TV. “If you model it out, over about the next three years they’ll take out about $1.3 trillion or so. That’s only a third of what they put into the market. So it’s going to be very slow, very gradual, very deliberate and it shouldn’t lead to any near-term fireworks into the market at all.”

Beyond the Fed, Europe’s increasingly bullish growth story, ongoing Brexit drama and efforts by China to counter excessive currency strength provide plenty of alternative narratives. Meanwhile the U.S. president will address the United Nations at 10:30 a.m. in New York, as world leaders continue to seek a diplomatic solution to North Korea’s nuclear provocations.

Terminal subscribers can read more in our Markets Live blog.

What to watch out for this week:

– Brexit strategy is in focus as Theresa May prepares to outline her revised approach on Friday.
– The Fed’s rate decision is Wednesday.
– The Bank of Japan is predicted to stand pat when it reviews policy Thursday. The BOJ probably won’t reveal when it will unwind stimulus, but could signal determination to keep the yield curve under control.
– Indonesia, the Philippines and South Africa are among countries also reviewing monetary policy this week.
– Home construction and sales of previously owned properties are the highlights of the week’s U.S. economic calendar.
– Campaigning continues in Germany, days before the Sept. 24 election. New Zealand goes to the polls on Sept. 23.

Here are the main moves in markets:

Stocks

– The S&P 500 Index climbed 0.1 percent to 2,506.52 as of 9:31 a.m. in New York.
– The Dow Jones Industrial Average added 0.2 percent to 22,364, and the Nasdaq Composite Index rose 0.2 percent.
– The Stoxx Europe 600 Index was virtually unchanged after erasing earlier declines.
– The MSCI All-Country World Index increased 0.3 percent to the highest on record.
– The MSCI Emerging Market Index dropped 0.2 percent.

Currencies

– The Bloomberg Dollar Spot Index decreased 0.2 percent.
– The euro climbed 0.3 percent to $1.1986, the strongest in more than a week.
– The British pound increased 0.3 percent to $1.3533.

Bonds

– The yield on 10-year Treasuries fell one basis point to 2.22 percent, the largest fall in more than a week.
– Germany’s 10-year yield declined two basis points to 0.44 percent, the biggest fall in more than a week.
– Britain’s 10-year yield rose one basis point to 1.314 percent, the highest in almost 11 weeks.

Commodities

– Gold gained 0.1 percent to $1,308.30 an ounce.
– West Texas Intermediate crude rose 0.9 percent to $50.38 a barrel, hitting the highest in almost four months with its seventh consecutive advance.

Asia

– Japan’s Topix index added 1.8 percent at the close in Tokyo. The Kospi index lost 0.1 percent in Seoul as did Australia’s S&P/ASX 200 Index. Hong Kong’s Hang Seng Index dropped 0.4 percent and the Shanghai Composite Index was down 0.2 percent.
– The Japanese yen gained 0.1 percent to 111.44 per dollar.

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