Markets Quiet To Start Fed Week

Overview: Activity in the global capital markets is subdued as investors move to the sidelines as the year-end approaches. The Federal Reserve headlines the holiday week that also features a Bank of England a Bank of Japan meeting. Only the Fed is expected to change rates. The dollar, which rose against most currencies last week, is a little softer today. Global equities are mostly lower, though the Nikkei. Benchmark 10-year yields slipped in Australia and Japan, but are edging higher in Europe. US shares are little changed in Europe. The North American economic calendar begins off light with the US reporting the Empire State manufacturing survey, offering among the first insights into activity in December, while Canada reports November existing home sales, which fell in both September and October. Both the US and Canada report on portfolio capital flows. 

Asia Pacific 

Approval for Japan's cabinet softened nearly five percentage points over the past month to stand at 42.4%. The monthly survey found a majority do not approve of the recent law to allow more foreign guest workers. The BOJ meeting concludes a day after the FOMC meeting. It has slowly reduced its bond purchases but has not called it tapering and the 10-year benchmark JGB has drifted back to near zero (less than two basis points today). No one expects the BOJ to hike rates before the sales tax increases next October.

China holds its annual policy summit to set next year's priorities this week. There are two main schools of thought. The first holds that Chinese officials did not realize how isolated they were on the international stage and will seek to mend fences and strengthen domestic institutions, including modernizing the economy, to be better positioned in the future to withstand tensions with the US. It will seek to accommodate the US now and help its industry move up the value-added chain and find alternative markets and inputs. The second is more pessimistic near-term. President Xi is depicted as more nationalist and less reform-minded. Small concessions may be made to the US but not enough to avoid an escalation of trade tensions.

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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