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Markets drop across the globe ahead of Fed decision

Published : Tuesday, 19 September, 2023 at 12:00 AM  Count : 133

HONG KONG, Sept 18: Stock markets started the week limply Monday following a sell-off on Wall Street, with focus turning to the Federal Reserve's keenly awaited key policy decision.
Traders were a little more cautious after the healthy close to last week that was fuelled by another batch of positive Chinese data suggesting the world's number two economy is stabilising.
But US interest rates once again take centre stage this week, with investors expecting officials to stand pat while hoping for some guidance on its plans in the coming months.
A recent run of indicators suggests the economy and labour market remain resilient even after more than a year of interest rate hikes, meaning the central bank will have to keep open the option of another hike.
There is plenty of debate over what the Fed will do, with decision-makers appearing to differ.
Some have said they are happy with rates where they are and others have warned not doing enough could mean inflation will remain stuck well above the official two percent target.
SPI Asset Management's Stephen Innes said the Fed had to tread a fine line and Wednesday's decision was a key focal point owing to "its potential implications for the broader economy and financial markets".
"Any dovish deviation could encourage the markets to sell the dollar and hammer Treasury yields lower. Such a move would undermine the Fed's efforts and credibility to combat inflation," Innes said.
"Conversely, implementing a 25 basis point rate hike could be perceived as inconsistent with the Fed's objective of engineering a soft landing and may adversely affect risk appetite."
And Brown Brothers Harriman & Co's Win Thin said: "The Fed will be sufficiently hawkish so that markets don't think it is done hiking."
With economic data still showing strength, "simply put, current conditions warrant further tightening, period", he said.
Hong Kong, Sydney, Seoul, Singapore, Mumbai, Bangkok, Taipei, Manila and Jakarta were in the red, though Shanghai and Wellington edged up.
London was flat at the open, while Paris and Frankfurt fell.
The tepid performance came after a tough day on Wall Street, where the Nasdaq and S&P 500 tanked more than one percent owing to a retreat in tech giants including Amazon, Microsoft and Facebook parent Meta.
Traders were also spooked by a strike at the factories of car titans Ford, General Motors and Stellantis involving about 12,700 workers, with union leaders warning action could spread if pay demands are not met.
Oil prices extended gains on demand expectations as China's economy shows some signs of revival and the United States remains healthy, compounding an output cut by Russia and Saudi Arabia to the end of the year.
Comments by Saudi Energy Minister Prince Abdulaziz bin Salman will be closely watched when he addresses a conference on crude policy later Monday.
Observers say that, with output unlikely to pick up any time soon, prices could break back above $100 soon.    �AFP

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