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Equity markets mostly up as traders look ahead to Fed meeting

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Investors will be closely following Jerome Powell's post-meeting comments this week, hoping for a better grip on the Fed's plans for monetary policy./AFP
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Jun 15, 2021 - 08:28 AM

HONG KONG, CHINA — Most stock markets rose on Tuesday following a record-breaking day on Wall Street, but traders shifted cautiously ahead of the Federal Reserve’s next policy meeting later this week.

With coronavirus vaccines rolling out and businesses reopening in many countries, investors are broadly upbeat about the global economic outlook while fears have eased that an expected inflation spike will force central banks to taper their ultra-loose monetary policies.

The release of data last week showing US consumer prices jumped far more than forecast was taken in stride, suggesting a growing acceptance of the Fed’s insistence that spikes were to be expected owing to last year’s low base of comparison and supply bottlenecks, among other things.

That puts the Fed’s latest meeting — and boss Jerome Powell’s comments — firmly in the spotlight with dealers looking for an idea about its plans for policy in light of the US economy’s blockbuster recovery.

Several observers have warned that its pledge to not start tightening until unemployment is tamed and inflation is running persistently hot could backfire if the economy overheats, which could force it to hike interest rates at a sharper pace.

“We’re in a tug-of-war between the understanding that we’re having great economic growth and great earnings growth juxtaposed with the fact that we need to get our head wrapped around what inflation looks like and what it will mean both to profit margins and to the Fed,” said Art Hogan, chief strategist at National Securities.

Nervous traders 

The S&P 500 and Nasdaq both clocked record highs Monday, while London’s FTSE hit a 2021 peak, despite expectations the UK government would delay lifting its remaining lockdown restrictions. The move was confirmed later in the day.

But trading floors remain nervous places as governments in parts of the world are still battling to overcome the virus and more transmissible variants, which are either forcing them to delay reopenings or reimpose fresh containment measures.

Still, Tokyo ended up one percent, while Wellington added a little more with gains also seen in Sydney, Seoul, Singapore, Taipei, Manila and Mumbai.

But Hong Kong fell as investors returned from a long weekend, with eyes on a nuclear plant across the border in China following a US report of a potential leak. The Chinese central bank’s decision to drain liquidity from financial markets hit buying demand from investors north of the border.

Shanghai, Bangkok and Jakarta also slipped.

London, Paris and Frankfurt all rose at the open.

Bitcoin held above $40,000 after Elon Musk said at the weekend that Tesla would start accepting the unit again once it is mined more ecologically, while it also got a boost from top hedge fund manager Paul Tudor Jones, who endorsed it as a good hedge against inflation.

However, Marc Odo of Swan Global Investments said: “These days, bitcoin’s market pivots on what Elon Musk tweets — for me, that’s not a great indicator. It’s like some billionaire’s whim.

“I don’t think there’s anything fundamentally moving bitcoin one way or the other, other than rumours and tweets. That’s not an asset class I want to be involved with.”

Oil prices rose as demand optimism overshadowed virus infection concerns, with both contracts around multi-year highs and the gains are seen as likely to continue.

“That oil has rallied so significantly in the face of notable US Dollar strength suggests the rally has plenty left in it,” OANDA’s Jeffrey Halley said.

Key figures at 0720 GMT 

Tokyo – Nikkei 225: UP 1.0 percent at 29,441.30 (close)

Hong Kong – Hang Seng Index: DOWN 0.6 percent at 28,660.32

Shanghai – Composite: DOWN 0.9 percent at 3,556.56 (close)

London – FTSE 100: UP 0.3 percent at 7,164.80

Euro/dollar: UP at $1.2136 from $1.2124 at 2050 GMT

Pound/dollar: UP at $1.4113 from  $1.4107

Euro/pound: UP at 85.99 pence from 85.91 pence

Dollar/yen: DOWN at 110.06 yen from 110.08 yen

West Texas Intermediate: UP 0.4 percent at $71.19 per barrel

Brent North Sea crude: UP 0.5 percent at $73.23 per barrel

New York – Dow: DOWN 0.3 percent at 34,393.75 (close)

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