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Asian stocks hit decade high, dollar firm before Fed meeting

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Illustration Chad Crowe

FED WATCH: At the end of its two-day meeting on Wednesday, the Federal Reserve was widely expected to announce it will begin to reduce its enormous bond portfolio, which stands at $4.5 trillion.

The US Federal Reserve Bank is in the middle of its two-day policy meeting and there is some uncertainty about exactly what the outcome of that meeting will be.

The central bank's policymakers said they will likely raise rates one more time this year.

After pushing the S&P above its 2,500-point milestone last week, investors were holding their fire as they awaited more clues on the timing of the next rate hike from Fed Chair Janet Yellen. Retail sales this morning will take on added importance given recent rhetoric from the Bank of England that suggests an interest rate hike may be on the horizon. But in the current quarter, the pace of expansion has slowed to 1.7 percent, according to Macroeconomic Advisers, with hurricanes Harvey and Irma, among other factors, dampening activity. Stocks have also set a string of record highs.

Click to Enlarge The short-term Treasury bond market is behaving as we would expect in this environment, pushing up to levels not seen since 2008 in anticipation of tighter monetary conditions and higher inflation - which is the outlook the Fed maintains. China's Shanghai Composite Index gained 0.3 percent to 3,366.00.

Market odds for at least one rate increase by December were approaching 60 percent by Tuesday afternoon. West Texas Intermediate crude fell for the first time in more than a week as traders awaited storage data that may show the longest expansion of USA crude inventories in nearly half a year.

The main safe-haven asset, gold, has fallen sharply (-0.8pc), reversing earlier gains, following the Fed's policy announcement.

Following the recent slowdown in inflation the median projection of future hikes is likely to be somewhat downgraded, which may pressure the greenback lower this evening.

As of 1931 BST, the yield on the benchmark 10-year US Treasury note was up by three basis points to 2.28%. CalAtlantic Group fell the most, shedding 97 cents, or 2.7 percent, to $34.60.

Right now, the markets and economists are certain Yellen's post Fed-meeting announcement will include details on the beginning of what it calls "policy normalisation".

In October, the Committee will initiate the balance sheet normalization program described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans. Oil prices were higher, but pared gains after data showed a bigger-than-expected build in USA crude inventories.

The Energy Information Administration (EIA) report of weekly USA crude inventories showed a higher than expected rise at 4.6 million barrels. (NASDAQ:AAPL) fell 1.7% after Rosenblatt analysts highlighted weak iPhone 8 preorders relative to the iPhone 6 and iPhone 7 as iPhone X orders don't start until October 27.

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