Global Markets Subdued as Traders Eye Fed

The Federal Reserve will be holding its June policy meeting on Tuesday and Wednesday, after which it will announce its policy decision- but traders are already eager for the results, and are trading cautiously. Asian markets were trading mixed in the mid-afternoon on Monday without any of the strong movements that characterized the global stock markets last week. After its May policy meeting, Fed members hinted that an interest rate hike might be upcoming, largely due to continuing trade tensions and a global economic slowdown. Expectations are for the rate cut to take place next month, though some analysts still hold out hope for the big announcement this week. When implemented, it will be the first Fed interest rate hike in over a decade.

According to a poll conducted by the Wall Street Journal, nearly 40 percent of economists polled expect the interest rate cut in July.

Japan’s Nikkei 225 was up 0.16 percent as of 2:01 p.m. HK/SIN and the Shanghai Composite was up 0.10 percent. Hong Kong’s Hang Seng Index saw the strongest gains, trading up 0.68 percent. South Korea’s Kospi eased0.16 percent while China’s Shenzhen Composite was down 0.29 percent. Australia’s ASX 200 eased 0.19 percent.

On the currency markets, the dollar remained near two-week highs on Monday afternoon, with the dollar index easing slightly to 0.04 .DXY. The greenback was flat against both the Japanese yen and the British pound. The euro gained 0.04 percent against the dollar to trade at $1.1211.

Factors to Consider

Despite concerns about the state of the global economy and the U.S. economy in particular some analysts point out that things may not really be as bad as they seem. For example, retail sales activity increased in May by 0.5 percent. Though expectations were for a 0.7 percent increase, analysts argue that even a 0.5 percent increase shows a fairly strong economy. Other analysts argue that even if the data these days isn’t overwhelmingly strong, the pain felt thus far isn’t quite enough to justify an interest rate hike.

No matter what happens, it is interesting to note that under Jerome Powell’s leadership the Federal Reserve has had 10 policy meetings, and the equity markets have headed lower after nine of them. What this means for this week’s meeting remains to be seen.