European Shares Seen Unchanged Ahead Of Central Bank Meetings

Mae Love
September 19, 2017

Investors now put a December rate hike at less than a 50 percent probability in the futures market.

The Dow Jones Industrial Average rose 63.01 points, or 0.28%, to 22,331.35 and posted its fifth straight record close.

In commodity markets, metals shifted lower and oil prices steadied near last week's multi-month highs.

"We previously expected the Fed to hike interest rates again in December, but the continuing weakness in core inflation had left the chances of a move before year-end as little more than a coin toss and other recent developments have all but killed the possibility", Capital Economics wrote in a recent note. The following table shows rates for Asian currencies against the dollar at 0405 GMT.

The U.S. 10-year yield had dropped to the 10-month trough near 2.00 percent on September 8 on widespread risk aversion but has bounced back since. The central bank is expected to hold rates steady for now while signaling its intent to raise rates once more before the end of the year.

Investors were also debating any potential market impact from a possible snap election in Japan. Taking this step would count as a policy tightening initiative - as the Fed would reduce the amount of money they spent on asset purchases - and would further highlight their bullish view over the progress of the economy.

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The political uncertainty that is surrounding the exit from the European Union (EU) is a risk with, over the weekend, the United Kingdom foreign secretary Boris Johnson adding to that uncertainty by painting a positive picture of what he called a "glorious" post-Brexit Britain, and rejecting the notion of paying for access to the single European market. The Fed's balance-sheet drawdown is set up to run on autopilot, for instance, so tighter monetary policy is a foregone conclusion.

U.S. Defense Secretary Jim Mattis hinted on Monday about the existence of military options on North Korea that might spare Seoul from a brutal counterattack.

The dollar was up 0.5 per cent against the Japanese currency at ¥111.38.

NikeNKE.N fell more than 1 percent after a slew of price target cuts by brokerages. Brent crude, used to price worldwide oils, dropped 37 cents to $55.25 in London. Traders braced for a potential stockpile build-up expected later this week, limiting the prospect for further gains.

The dollar hovered near an eight-week high against the yen on Tuesday, supported as U.S. Treasury yields continued their sharp rebound from 10-month lows. Brent crude hovered at $55.50, not far from an nearly five-month high of $55.99 it had marked that day.

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