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Treasuries Rally on Eve of Fed Decision; Oil Sinks: Markets Wrap

All you need to know about global markets this morning.

Treasuries Rally on Eve of Fed Decision; Oil Sinks: Markets Wrap
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

(Bloomberg) -- Treasuries rallied and stocks eked out a gain a day before the Federal Reserve is expected to cut interest rates. Oil plunged as Saudi Arabia restarted the plant damaged in a weekend attack.

Crude gave back some of Monday’s 15% surge as Saudi officials said they had restored just under half the output lost at the Abqaiq plant, one of the world’s biggest oil facilities. The S&P 500 Index posted a small advance, with dividend paying real-estate shares faring best. Ten-year Treasury yields fell toward 1.8% and the dollar weakened after the New York Fed took action to calm money markets, injecting billions in cash to quell a surge in short-term rates that was threatening to drive up borrowing costs for companies and consumers.

As U.S. policy makers get ready to decide interest rates, investors are also trying to gauge the risk of a potential oil shortage weighing on a global economy that already seemed to be slowing down. Meanwhile, concerns linger about trade tensions, with U.S. and Chinese working-level negotiators set to resume talks in the next week, before a meeting of top officials in October.

Treasuries Rally on Eve of Fed Decision; Oil Sinks: Markets Wrap

The Saudi attack has reminded investors about the risks of geopolitical tensions escalating, according to Nela Richardson, an investment strategist at Edward Jones in St. Louis.

“We’ve pointed to U.S. trade escalation, we’ve pointed to Brexit, but we’ve seen that over the course of the last two years, unexpected triggers of risk can pop up,” she said. “And we don’t always know where that’s going to come from.”

Treasuries Rally on Eve of Fed Decision; Oil Sinks: Markets Wrap

The Stoxx Europe 600 edged lower. Equities in Shanghai and Hong Kong slid after China’s central bank disappointed investors when it refrained from lowering a key interest rate. Italian bonds fell after former Prime Minster Matteo Renzi left the Democratic Party, raising the prospect of further government instability. Emerging-market stocks headed for their first decline in five sessions.

These are some key events to keep an eye on this week:

  • The Federal Reserve is widely expected to lower U.S. interest rates in response to slowing global economic growth and muted inflation. Chairman Jerome Powell will hold a post-decision press conference Wednesday.
  • The Bank of Japan monetary policy decision is on Thursday, followed by a briefing from Governor Haruhiko Kuroda.
  • Bank Indonesia and Bank of England also decide policy on Thursday.
  • Australia jobs figures are out Thursday.
  • Friday is quadruple witching day for U.S. markets. When the quarterly expiration of futures and options on indexes and stocks occurs on the same day, surging volatility and trading can follow.

Here are the main moves in markets:

Stocks

  • The S&P 500 Index rose 0.2% at the close of trading in New York.
  • The Stoxx Europe 600 Index slid less than 0.1%.
  • The Shanghai Composite Index declined 1.7%.

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%.
  • The British pound rose 0.6% to $1.25.
  • The Japanese yen was little changed at 108.16 per dollar.
  • The euro rose 0.7% to $1.1072.

Bonds

  • The yield on 10-year Treasuries declined four basis points to 1.8%.
  • Germany’s 10-year yield rose one basis point to -0.48%.
  • Britain’s 10-year yield was little changed at 0.69%.

Commodities

  • Gold climbed 0.3% to $1,503.13 an ounce.
  • WTI crude dropped 6.1% to $59.06 a barrel.

--With assistance from Gregor Stuart Hunter, Andreea Papuc and Laura Curtis.

To contact the reporters on this story: Vildana Hajric in New York at vhajric1@bloomberg.net;Brendan Walsh in Austin at bwalsh8@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, ;Jeremy Herron at jherron8@bloomberg.net, Brendan Walsh, Todd White

©2019 Bloomberg L.P.