crude rose as traders mulled news of progress towards opening a pipeline that will transport oil from storage centres in the U.S. In commodity markets, gold came off a three-week high to stand at $1,255 an ounce, though that was still up from last week's trough of $1,211.44. Eurodollar and Fed fund futures have not fully priced in a first rate rise until the end of 2015. They have decided that tapering is not tightening and an actual rate hike is a distant prospect. In any case, investors seem to have made peace with the idea the Fed will taper soon, if not next week then by March, and that the economy can withstand the move. Shanghai's market lost 1.1 percent.ĭealers said many of the moves were caused by hedge funds unwinding what had been popular trades in short yen, short bonds, short gold, long dollars and long stocks. Japan's Nikkei fell 0.9 percent and South Korean shares 0.6 percent, even as the country reported its lowest jobless rate on record. Treasuries, the benchmark for global borrowing costs, edged back above 2.8 percent.Ĭelebrations of the U.S. With the jury still out on a cut in Fed stimulus, European governments bond were sticking to tight ranges as U.S. "There are the more macro reasons, but also the market had at the very least been expecting another LTRO (offering of cheap loans) by early next year and that is now in doubt." "The liquidity conditions are definitely tightening. "I'm afraid this euro squeeze is going to continue," Tan said. Societe Generale FX strategist Alvin Tan said that with the euro zone making progress and the European Central Bank looking increasingly inclined to sit on its hands, the euro could well hit its highest level of the year. In the FX market, the dollar was broadly firmer in reaction to the budget deal in Washington, though it struggled against the yen as a drop in the Nikkei in Tokyo drove up the Japanese currency.įocus in European remained on the strong euro as it sat just off a six-week high versus the dollar at $1.3762 and a five-year high versus the yen hit on Tuesday.
deal came as euro zone countries also edged closer to agreeing a long-awaited plan to close ailing banks and at least partly sharing the costs involved. Most Asian share markets had lurched lower overnight as investors booked profits on a range of once-crowded positions, but European stocks were holding their own after dropping on Tuesday. A recent run of strong data and comments from policymakers have bolstered expectations the process will start soon. The to-and-fro of when the Fed will begin to halt the flow of cheap dollars has dominated trading worldwide for months. "The only question remaining is as to whether they will avail themselves of it." "It certainly does appear that a window of opportunity could be opening up for the Fed to act next week without a sharp market reaction, said CMC Markets strategist Michael Hewson. Federal Reserve will soon start scaling back its $85 billion-a-month stimulus programme. It removed a key uncertainty hanging over markets, and it raised expectations that the U.S. For many investors, the deal carried dual significance.
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