London (AFP) – Global stock markets mostly rose as oil prices fell on Wednesday ahead of the Federal Reserve’s decision on US interest rates, with policymakers debating how to tame surging inflation in the world’s largest economy. With price increases running well above the central bank’s target and the Middle East crisis keeping crude above $100 a barrel, the Fed is widely tipped to lift borrowing costs for the first time since 2023, supporting the dollar. The move would be sure to anger US President Donald Trump, who has launched an unprecedented campaign to pressure the independent central bank to lower rates to spur economic activity.
But the persistent price pressures have driven government bond yields to multi-decade highs in recent weeks, weighing on global stocks. The yield on the 10-year US Treasury note climbed above five percent this week — a level not seen since 2007, before the global financial crisis kicked in. Lale Akoner, Global Market Strategist at eToro, said a Fed rate hike was already largely priced in by the markets, “leaving the policy guidance as the bigger potential catalyst.” Kathleen Brooks, research director at XTB, said “if the Fed fails to hike or sounds less hawkish than the market expects, we doubt this will be good for bonds, and instead will boost gold, as the market frets that the world’s most important central bank will lose control of inflation.”
Global stock markets were given a lift Wednesday as oil prices dropped after a US industry report pointed to a pick-up in stockpiles. Crude prices have nevertheless spiked around 20 percent this month as the United States and Iran remain at loggerheads and Saudi Arabia was forced to shut a key pipeline as it battles Houthi fighters in Yemen. Expectations for a 25-basis-point rate increase by the Fed strengthened after data last week showed robust jobs creation and stubbornly high consumer prices in the United States. Fed boss Kevin Warsh added to those bets last month when he delivered what was considered a hawkish speech at a gathering of central bankers and economists at Jackson Hole, Wyoming.
“Forward-looking indicators suggest the inflation overshoot is likely to persist for some time,” said Deutsche Bank’s Jim Reid, as markets also price in another increase by the end of the year. The Fed’s decision will be followed on Thursday by the Bank of England, which is expected to leave its benchmark rate unchanged as weak UK economic growth offsets high inflation. Official data Wednesday showed UK annual inflation remained above the BoE’s two-percent target, reaching 3.1 percent in August on surging fuel prices. The Bank of Japan is expected to hike rates on Friday owing to rising inflation and the need to maintain support for the yen.
Investors are also watching a planned summit between Trump and his Chinese counterpart Xi Jinping, with reports that they could agree to some tariff reductions.
– Key figures at around 1530 GMT –
Brent North Sea Crude: DOWN 3.7 percent at $104.77 per barrel
West Texas Intermediate: DOWN 4.1 percent at $104.77 per barrel
New York – Dow: DOWN less than 0.1 percent at 52,070.66 points
New York – S&P 500: UP 0.4 percent at 7,615.81
New York – Nasdaq Composite: UP 0.8 percent at 26,191.21
London – FTSE 100: UP 0.3 percent at 10,688.47 (close)
Paris – CAC 40: UP 0.6 percent at 8,140.59 (close)
Frankfurt – DAX: UP 0.5 percent at 25,537.75 (close)
Tokyo – Nikkei 225: UP 0.7 percent at 63,923.00 (close)
Hong Kong – Hang Seng Index: UP 0.2 percent at 24,713.78 (close)
Shanghai – Composite: UP 0.7 percent at 3,891.60 (close)
Euro/dollar: DOWN at $1.1539 from $1.1542 on Tuesday
Pound/dollar: UNCHANGED at $1.3477
Euro/pound: UP at 85.81 pence from 85.64 pence
Dollar/yen: UNCHANGED at 155.09 yen
© 2024 AFP
