Interest rate-sensitive sectors of the economy, such as housing construction, are being helped by record low rates, while the economy is growing strongly, the Reserve Bank of Australia said in the minutes of its September 6 board meeting released Tuesday.
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POWERED DOWN: Despite those moves, technology companies gave up an early gain to trade lower at midday.
The central bank has also acknowledged the potential costs of the unorthodox policy, prompting speculation the BOJ will probably seek to steepen the yield curve to mitigate the impact of negative rates on financial institutions.
“The Fed will not raise interest rates this week, but they will be pretty aggressive in saying a rate increase is coming”, said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird, which oversees $110 billion. However he said investors have more questions about the Bank of Japan’s plans. After surprising markets in January by moving its deposit rate into negative territory, the BoJ followed this up with what many commentators characterised as an underwhelming stimulus package in July. That number has since been scaled back to two hikes this year, with another three hikes in 2017, due to a global growth slowdown, financial market volatility and tepid US inflation.
The Dow Jones industrial average rose 35 points, or 0.2 percent, to 18,158 as of 2:30 p.m.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%, but it was headed for a loss of 2.4% for the week.
The Fed’s two-day meeting starts on Tuesday in which policymakers will debate over the US economy and its ability to absorb a rate hike. Banks got a boost as some investors hoped that interest rates will rise, which would allow banks to make more money from lending. JPMorgan Chase rose 44 cents to $66.26 and Bank of America rose 18 cents, or 1.2 percent, to $15.56.
USA electrical components distributor Avnet was up 8.8% after it announced the sale of its IT business to tech products distributor Tech Data Corp for about US$2.6bil. Tech Data says the deal will give it operations in 35 countries. Its stock rose $14.60, or 21.1 percent, to $83.94 and Avnet gained $3.09, or 7.9 percent, to $42.31. India’s Sensex lost 0.4 percent to 28, 535.24.
OIL: Benchmark U.S. crude added 59 cents, or 1.4 percent, to $43.62 a barrel in NY. Brent crude, used to price worldwide oils, rose 18 cents to 45.95 United States dollars a barrel in London. Copper remained at $2.16 a pound. Changes to the mix of bonds it’s buying could have global repercussions, since investors flocked to Treasurys as an alternative to low and negative yields in Japan and Europe. Advancers were outnumbering decliners by more than 4-to-1.
But while the Fed would usually be more closely watched by global markets, this time around, the BOJ will have financial players hanging on the edge of their seats. The yield on the 10-year U.S. Treasury note remained at 1.69 percent.
The dollar eased 0.2 percent against the yen to 102.02 in holiday-thinned trading, as Japanese markets were closed for a public holiday. South Korea’s Kospi added 0.8 percent and Hong Kong’s Hang Seng index rose 0.9 percent.
The dollar index was down 0.25% mid-morning, at 95.81.
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Canadian Natural Resources Ltd. rose 1 per cent to $38.97 and Encana Corp. was up 2.3 per cent to $13.17. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. The S&P/ASX 200 finished little changed.
