Market Close Sep 16

Markets hope Fed will signal lower for longer

Sentiment lifted by Trump’s vaccine claims; Eyes on US Fed to message low rates for longer; safe havens gain as investors hedge bets 

Markets hope Fed will signal lower for longer
Passersby wearing protective masks walk past an electronic board showing Japan's Nikkei average, the exchange rate between Japanese yen against the U.S. dollar and other world's benchmarks outside a brokerage, amid the coronavirus disease (COVID-19) outbreak, in Tokyo on September 14, 2020. REUTERS/Issei Kato.

(ATF) Hong Kong: Investor sentiment was lifted by vaccine hopes following US President Donald Trump’s comments, but financial markets remained watchful ahead of the US Federal Reserve monetary policy statement.

While rates are expected to stay unchanged, eyes are on the "dot plot" – how they could play out, given ultra-low rates are expected to extend for years.

“We’re very close to having a vaccine,” Trump said at a town hall event. But the timing of the vaccine remains uncertain, as he initially said it could be ready in as little as “four weeks” but later said it could come in “four weeks, [or] it could be eight weeks”.

The US Federal Reserve will provide its revised economic projections, and indications on inflation targeting and asset purchases at the end of its two-day meeting later today, while rates will be kept unchanged.

“There is a good chance that the 'dot plot' could be lowered to reflect that shift to AIT [average inflation targeting] and the idea of lower rates for longer. This could drag on demand for the US dollar, which has been under pressure this week heading towards the FOMC announcement,” said Fiona Cincotta, market analyst at data provider City Index. 

“The prospect of lower rates for longer is a winner for non-yielding gold. A lowering of the dot plot could see the precious metal build on its almost 1% gains so far this week. $2,000 [an ounce] is back as a clear target, a level last seen a month ago.”

Australia’s S&P ASX 200 outperformed the region with a gain of 1.04%, while Japan’s Nikkei 225 edge up 0.04%, but China’s mainland index CSI300 fell 0.66%, and Hong Kong’s Hang Seng index dipped 0.03%.

Safe havens were in demand with the yield on US 10-year Treasuries dipping one basis point to 0.68% and gold climbing 0.6% to $1,966 per ounce.

Asian credit markets remain firm with the Asia IG index shrinking a basis point to 56/57 and primary markets welcoming new issuers. New deals in the market include ICBC’s perpetual bondsHefei Industry’s new mandate for dollar bonds, and Beijing Enterprise’s euro- denominated green bonds. This follows successful pricing by China Three GorgesHenan Water’s $500-million 5-year bonds deal, and Times China $350 million bond.

ATF China Bond 50 Index: ATF index gauges rise as benchmark lending rate held steady

Also on Asia Times Financial

As US ban on Huawei starts, China tech giant claims 31% of market 

HNA Group's wings clipped by 2020 black swans

Huayang Group's spectacular 'ring of debt'

Alipay loans hit 300 bn yuan as youth turn to credit

New SEBI rules leave Indian MF investors confused 

Asia Stocks

· Japan’s Nikkei 225 index edged up 0.09%

· Australia’s S&P ASX 200 added 1.04% 

· Hong Kong’s Hang Seng index dipped 0.03%

· China’s CSI300 eased 0.66%

· The MSCI Asia Pacific index advanced 0.69%.

Stock of the day

China Tobacco Intl. rose as much as 16% after it unveiled a reorganisation that will put it under the direct control of China National Tobacco Corporation, which was the holding company of the previous owner.