• Treasury yields tick lower • Gold prices edge down • Japan’s exports drop Global stocks paused ahead of an interest-rate decision from the Federal Reserve, amid political tensions and a volatile week for oil prices.
The Stoxx Europe 600 teetered between small gains and losses in early morning trading after a mixed session in Asia. The Shanghai Composite rose 0.3% and Korea’s Kospi gained 0.4%, while Japan’s Nikkei slipped 0.2%. Japan’s exports dropped 8.2% on year last month, a more rapid fall than expected, adding to speculation that the central bank may seek to cut interest rates deeper into negative territory. The weak data came as global uncertainty has boosted the yen, regarded as a haven by investors, by 1.4% against the U.S. dollar so far this year. Global oil benchmark Brent crude slipped 0.4% to $64.30 on Wednesday, following days of sharp swings after an attack on production facilities in Saudi Arabia. The tick downward came after the Saudi energy ministry said the kingdom would recover output in weeks.
The attack caused the Brent price to rise 15% on Monday, the biggest leap in a single day since 1988, before dropping back by 6.5% on Tuesday. The volatility spread to other asset types, including junk bonds. Energy firms account for about 6% of debt outstanding in the high-yield market. Meanwhile, the Federal Reserve later Wednesday is expected to cut its short-term benchmark interest rate by a quarter percentage point, following a cut of the same amount in July. The central bank is seeking to balance domestic concerns, such as a relatively tight labor market, against a slowdown in global trade. After its Wednesday meeting, the Fed is also expected to release more details on the likely future course of interest rates.
Traders work on the floor at the closing bell of the Dow Jones Industrial Average at the New York Stock Exchange on Sept. 16.
Bryan Smith/Zuma Press
The Fed on Tuesday had to step in to address a problem in money markets. It was the first time since 2008 that the central bank had to inject cash to keep interest rates down for short-term borrowing, and it is unclear how long the market intervention will last. Data on construction in the U.S. will also be released Wednesday. The figures for August follow three straight months of declines in the number of homes being built. The yield on 10-year U.S. Treasurys ticked down to 1.785%, from 1.805% Tuesday. Yields fall as bond prices rise. Gold prices slipped 0.3%. Write to Anna Isaac at firstname.lastname@example.org
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