MARKET WRAPS
Watch For:
EU ECB survey of monetary analysts results published; Germany Bundesbank monthly report; trading updates from Phoenix Group
Opening Call:
Shares may start off weak in Europe on Monday amid cautious sentiment ahead of the Federal Open Market Committee meeting this week. In Asia, stock benchmarks were mixed; the dollar held steady; while oil advanced and gold slightly gained.
Equities:
European stocks could retreat at the open on Monday as investors await the Fed's policy decision on Wednesday.
Many traders expect the Fed to keep rates steady at its meeting, although the outlook for the rest of the year is murkier.
"The picture of inflation continues to be difficult," said Amundi U.S. "The market is starting to understand that the Fed will keep interest rates high for longer."
Some analysts also worry that the strike of the United Auto Workers against the Big Three U.S. automakers, Ford, General Motors and Chrysler owner Stellantis, could drive up car prices, adding more fuel to inflationary pressures that have started to re-emerge over the summer while stoking fears about the impact on the broader U.S. economy.
Forex:
The dollar was on a steady footing amid a cautious mood ahead of the FOMC meeting this week.
No policy change is widely anticipated at the meeting, RBC Capital Markets said.
But market participants are worried about a hawkish dot-plot update, especially if the median Fed Funds dot continues to show one more rate increase this year and if the 2024 dot suggests fewer rate cuts, it added.
ANZ Bank views the greenback as the default play amid challenges facing China and Europe
"That's understandable with no differentiating story to tell here, and with markets attuned to USD exceptionalism," ANZ said.
"Worse still, it's hard to see that changing this week with a Fed pause, which has the potential to underscore the U.S. soft landing vibe, even though there are skeptics aplenty."
Bonds:
Treasurys didn't trade in Asia due to a holiday in Japan.
Treasury yields ended at their highest levels of the month on Friday and notched their second weekly advance as the United Auto Workers went on strike, raising concerns about a return of price pressures in the auto sector.
The Fed's policy decision is looming. While there is virtually no chance of a rate hike, central bankers will be updating their economic and interest-rate forecasts.
"Markets are effectively certain the Fed will leave rates unchanged (this) week, and the odds of an additional hike this year are still roughly a coin toss after this week's data," FHN Financial said.
"Notably, the highest probability for an additional hike, according to fed funds futures trading, is now at the December meeting instead of the November meeting, a slight change from the past four months, although a few percentage points in market-implied probability doesn't mean very much."
Energy:
Oil prices were higher in Asia amid supply tightness and better demand outlook.
Saudi Arabia and Russia's decision to extend production cuts to the end of the year has created a very tight market, Oanda said.
Meanwhile, the short-term crude demand outlook is getting a boost from improving U.S. and China economic data, it said. "The oil market is going to stay tight a while longer, but we might need to see a fresh catalyst to send oil to triple digits," it added.
Although crude prices may be ripe for a technical pullback over the short term, oil benchmarks may yet take further strides towards the psychologically-important $100 level, "provided that global supply-demand dynamics truly warrant prices moving even higher," Exinity Group said.
Metals:
Gold edged higher ahead of the Fed's September policy decision.
The meeting will be a big event for the precious metal, as the Fed will not only announce its latest interest-rate decision but will also release new economic forecasts, said Oanda.
The Fed's decision will affect global bond yields, which is key to gold prices. Lower bond yields tend to boost the appeal of the non-interest-bearing metal.
"A hawkish tone emanating from next week's FOMC meeting may be the catalyst for gold to revisit sub-$1,900 domain," said Exinity Group.
"However, should markets infer dovish clues out of the FOMC policy statement and/or Fed Chair Jerome Powell's press conference, that could see spot gold carve out a larger gap above $1,900."
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Copper was trading steadily in the morning Asian session, and could be supported by possible short-covering.
Prices of the base metal are flirting with levels that could spur commodity trading advisors to cover some of their short positions, said TD Securities.
Also, better-than-expected Chinese economic data and the People's Bank of China's reserve-requirement-ratio cut have prompted hopes for some stabilization in China, it added.
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Iron ore prices were lower amid higher supply and declining profit at steel mills, which could lead to reduced steel production. Iron ore is a raw material for making steel.
Molten-iron output continues to rise despite low steel mill inventory, Nanhua Futures said.
With the gradual decline of profits at steel mills, "downstream demand may have the risk of not booming in the peak season," the analysts said.
TODAY'S TOP HEADLINES
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HONG KONG-Starting in the 1990s Japan became synonymous with economic stagnation, as a boom gave way to lethargic growth, declining population and deflation.
Many economists say China today looks similar. The reality: In many ways its problems are more intractable than Japan's. China's public debt levels are higher by some measures than Japan's were and its demographics are worse. The geopolitical tensions that China is dealing with go beyond the trade frictions Japan once faced with the U.S.
Arm IPO Excites Wall Street, but Challenges Loom
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The British company made its market debut last week, rising 19% over its first two days of trading. To meet investors' high expectations, Arm, whose circuits are in almost all smartphones, must expand into other electronic devices where it has less of a foothold, capture surging demand for chips that process artificial-intelligence calculations and manage growing geopolitical tensions centered on China.
Wall Street Is Furious Over Rising Fines From SEC
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Republican Groups Craft Short-Term Bill to Keep Government Open
Two major groups of House Republicans put together a short-term funding proposal to prevent a government shutdown, moving to break the deadlock in their party ahead of down-to-the-wire negotiation with Democrats to keep the government funded past Sept. 30.
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Ukraine's Hunger for Howitzers Transforms an Arms Industry
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The 155mm K9 self-propelled howitzer is at the center of South Korea's unlikely rise as a weapons exporter. Manufactured by Hanwha Aerospace, it is the country's bestselling weapon. Demand for howitzers and other weapons made in South Korea has been turbocharged as Russia's invasion of Ukraine has turned into a grinding land war.
Volodymyr Zelensky to Meet Biden, Lawmakers in Washington Amid Push for More Aid
WASHINGTON-Ukrainian President Volodymyr Zelensky is planning to travel to Washington next week for meetings with President Biden and U.S. lawmakers as he pushes for additional aid for his war-torn country, according to people familiar with the matter.
Zelensky is scheduled to travel to the U.S. for the annual United Nations General Assembly in New York, where he will appear in person for the first time since Russia's February 2022 invasion, to make a case for continued support of Ukraine and isolation of Moscow. Following the summit, he is expected to continue on to Washington, the people said. The White House declined to comment.
Libya Floods Overwhelm Aid Workers as Disease Worries Rise
As aid trickles into Libya following floods that killed thousands, relief workers say the magnitude of the crisis is overwhelming, with equipment and manpower shortages, concerns about disease and rivalries between the country's competing authorities.
(MORE TO FOLLOW) Dow Jones Newswires
09-18-23 0015ET
