A hesitant start to trading in Asian markets is on the cards today ahead of tonight’s meeting of the Fed and the release early tomorrow morning of the long expected statement from the US central bank, plus updated economic forecasts and chair Janet Yellen’s quarterly media conference.
The markets took their lead from the Bank of Japan’s decision to sit on its existing policy of a huge spending campaign and a partial negative deposit rate, despite downgrading its view of the Japanese economy.
The Reserve Bank of Australia confirmed it was sitting and watching the local economy, and that meant no change to interest rates.
The RBA is more confident about the economy, and that spooked the dollar into falling sharply – an odd move given the central bank didn’t tell us anything we didn’t already know from speeches and statements from bank officials in the last month.
Markets are still dealing with last Thursday’s collection of policy moves from the European Central Bank, so the Bank of Japan was always seen as not doing very much at its two day meeting this week.
And after the confusion caused by the move to partial negative deposit rates on January 29, the Bank of Japan’s circumspection was expected, and the Fed tonight however is expected to be more expansive.
So a rate rise is not expected tomorrow morning, but the Fed will make the timing of future rate rises clearer, thereby giving markets more certainty, for the time being.
Our market will start basically flat this morning, but will have to contend with a near 5% slide in global iron ore prices yesterday and last night to $US52.88 a tonne – well under the $US63.74 a tonne peak hit a week ago last Monday. That’s a drop of more than 16%.
Gold fell 0.9%, while copper prices also weakened.
The Aussie dollar was trading around 74.50 this morning from the most recent peak on Tuesday of 75.80 US cents.
On Wall Street, the S&P 500 ended 3.71 points, or 0.2%, lower at 2,015.94, while the Nasdaq finished 21.61 points, or 0.5%, lower at 4,728.67. The Dow closed higher, gaining 21.92 points, or 0.1%, to 17,251.12.
European markets fell across the board as oil prices weakened, and there were similar falls in Asia.
Australia’s ASX 200 ended down 1.4%, a nasty fall, Korea’s Kospi lost 0.1%. Tokyo fell 0.6%, but the Shanghai Composite Index closed up up 0.2%. Hong Kong’s Hang Seng Index went the other way, falling 0.7%.
