Wednesday Morning Briefing: Fed, ECB Uncertainty, Crude Gains
U.S. and Asian stocks decline on fears that central banks will reduce their stimulus.
Asian stocks opened mixed over prospects of global central banks adopting less accommodative policies.
Japanese stocks gained as the yen dropped, but the rest of Asia traded with losses. Markets in China remain shut on account of a holiday.
ECB Stimulus Jolt
The European Central Bank may wind down bond purchases in steps of 10 billion euros a month, once a decision is taken to end quantitative easing, according to euro-zone central-bank officials cited by Bloomberg.
Fed Concerns
Federal Reserve Bank of Richmond President Jeffrey Lacker called for tighter monetary policy from the U.S. central bank. Lacker urged the Fed to hike rates to stave off a likely pickup in inflation that would force bigger increases later. Lacker’s comments come just days after Cleveland Fed President Loretta Mester signalled that a rate hike could be possible in November.
The concerns that global central banks may be starting to map their retreat from easy money policies sent U.S. stocks lower on Tuesday. The S&P 500 Index fell 0.64 percent led by utility stocks.
Meanwhile, the International Monetary Fund reduced U.S. growth forecast to 1.6 percent from their July prediction of 2.2 percent.
Crude Stockpiles Rise
Oil rose to above $49 per barrel after data from the American Petroleum Institute showed that inventories fell 7.6 million barrels last week. However, Energy Information Administration data on Wednesday is forecast to show stockpiles increased.
A deal between Organization of the Petroleum Exporting Countries (OPEC) and non-member nations could cut output by 1.2 million barrels per day, according to Venezuela’s oil minister. Such a deal could boost prices by as much as $15 per barrel, the minister added.
After posting strong gains in the previous week, gold futures for December delivery fell as much as three percent, clocking their worst trading day since 2013.
Quiet Wednesday?
The SGX Nifty index traded little changed at 8,792 as of 7:15 a.m. indicating a quiet start for Indian equities.