Economy

Stocks notch up new high but it's all about the Fed

Stocks notch up new high but it's all about the Fed”

Stocks soared on the Tokyo Stock Exchange on Tuesday thanks chiefly to the yen's weakening against the dollar and higher US equities, driving up the benchmark Nikkei average to its highest closing level in 25 months.

USA crude futures were up 0.1 percent at $49.98 per barrel, within sight of Thursday's almost four-month high of $50.50.

There was relief the weekend passed with no new provocation by North Korea, though Pyongyang's nuclear ambitions will be center stage when President Donald Trump addresses world leaders at the United Nations on Tuesday. But Britain's FTSE 100 added 0.2 percent to 7,269.87. Samsung Electronics led the gains, along with healthcare and financial stocks. The Tokyo market was closed on Monday for a national holiday.

For markets, the main event will be the Fed's meeting on Tuesday and Wednesday, where it is likely to take another step toward policy normalisation amid what is rapidly becoming a global trend.

THE FED: The consensus in markets is that the Fed will hold off from raising interest rates again but indicate that another increase could come in December.

The Canadian central bank hiked interest rates this month and left the door open for more tightening, while a BoE policymaker hinted last week that it might need to raise rates in the coming months.

In its statement, the Fed, as expected, left rates unchanged and also said it would begin in October to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities.

USA 10-year Treasury yields, which edged up on Tuesday, retreated 1.8 basis points on the day to 2.23 percent.

The seismic shift in rates saw sterling hit its highest since the Brexit vote and notch its best week in nearly nine years against a currency basket.

On forex markets talk of more stringent monetary policy supported the dollar, with the pound rowing back from levels above US$1.36 after the head of the Bank of England indicated possible British rate rises could be slow and gradual.

Traders were also eyeing the possibility of a snap election, reportedly as soon as next month.

The dollar edged down 0.1 percent to 111.47 but remained not far from Monday's eight-week high of 111.66.

The dollar index against a basket of six major currencies was up fractionally to 91.868.

The greenback was little changed at 111.640 yen after touching 111.880 overnight, its highest since late July. The euro was 0.1 percent higher at $1.1961.

ENERGY: Benchmark U.S. crude rose 36 cents to $50.27 a barrel while Brent crude, used to price global oils, advanced 17 cents to $55.67. It rose 2 cents to $49.91 a barrel on the New York Mercantile Exchange on Monday.



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