Muted Start Seen for Asian Stocks; Treasuries Flat

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(June 18): Asian stocks were set for a muted start Tuesday as traders bided their time ahead of this week’s key Federal Reserve decision. The dollar and Treasures were little changed.

Futures in Japan and Australia were flat after the S&P 500 Index closed little changed. The Nasdaq 100 posted a modest gain as technology shares outperformed. The dollar briefly weakened after a Federal Reserve survey of factories in New York state plunged in June by the most on record, then climbed back from the day’s lows. Treasuries pared a drop on the news. Crude oil declined.

Traders are refraining from putting on big bets ahead of the key central bank decision Wednesday, where they will look for signals on the likelihood of interest-rates cuts ahead. There’s a widespread desire for proof the Fed is ready to act, but too much change could raise alarm.

“We know that the Fed doesn’t like to surprise people and the idea at this point of them digging in their heels and saying ‘absolutely no cuts,’ I think is very unlikely,” Josh Kutin, head of asset allocation for Columbia Threadneedle, said in an interview at Bloomberg’s New York headquarters. “Will it be the full number that’s priced in right now? I think that’s unlikely as well. I think somewhere between is pretty fair.”

Elsewhere, oil fell on Monday as Saudi Arabia expressed hope that OPEC and its allies will agree to extend production cuts into the second half.

Here are some key events coming up:

  • Federal Reserve, the Bank of Japan and the Bank of England all set monetary policy, along with central banks in Norway, Brazil, Taiwan and Indonesia.
  • The Fed meeting begins Tuesday with a decision and press conference the next day. Officials are expected to debate a rate cut to shelter the U.S. economy, in part, from the fallout caused by escalating trade disputes.
  • In the U.K. Tuesday there will be a second ballot on the leadership contest to choose Theresa May’s successor as leader of the country’s ruling party.
  • Final May CPI data for the euro zone are due Tuesday.

These are the main moves in markets:

Stocks

  • Nikkei 225 futures were little changed.
  • Hang Seng futures were little changed.
  • The S&P 500 Index rose 0.1%, while the Nasdaq Composite Index gained 0.6%.
  • The Stoxx Europe 600 closed little changed.

Currencies

  • The Bloomberg Dollar Spot Index rose less than 0.1%.
  • The euro rose less than 0.1% to $1.1221.
  • The yen was little changed at 108.57 per dollar.
  • The offshore yuan was little changed at 6.9318 per dollar.
  • The British pound was little changed at $1.2536.

Bonds

  • The yield on 10-year Treasuries rose about 1 basis point Monday to 2.09%.
  • Germany’s 10-year yield rose 1 basis point to minus 0.24%.

Commodities

  • West Texas Intermediate fell 1.1% Monday to $51.93 a barrel, the first drop in three trading sessions.
  • Gold was little changed at $1,339 an ounce. - Bloomberg