WTI crude extends decline below $50; Treasuries hold gain
Fed rate decision, Powell comments loom large this week
S&P 500 ‘Probably Lower’ in 2019, InvestSMART’s Lucas Says
Asian stocks slid Tuesday after a sell-off in U.S. stocks that sent the S&P 500 Index to its lowest close in 14 months, as investors readied for an expected Federal Reserve interest-rate hike.
Stocks hit their lows of the day on disappointment that Chinese President Xi Jinping omitted any mention of new reforms or stimulus measures to prop up the economy in a keynote speech hailing his country’s opening up to the world. European futures were also lower and U.S. contracts came off their highs. Earlier, the S&P 500 Index finished Monday at the lowest since October 2017, and the Russell 2000 Index of smaller companies entered a bear market. The dollar held a decline as 10-year Treasury yields hovered around 2.85 percent and the yen advanced with gold as haven assets curried favor. U.S. crude fell further below $50 as fears of a supply glut grew.
“Any news is being taken as bad,” regardless of the context, said Evan Lucas, chief market strategist at Investsmart Group, on Bloomberg Television. “We are trading like we’re in a bear market,” with little likelihood of relief in volume-thinned markets in the holiday period ahead, he said.
Investors will be scrutinizing the Fed’s statement Wednesday, as well as Chairman Jerome Powell’s news conference, for clues as to its intentions for 2019. President Donald Trump again weighed in, tweeting Monday that it was “incredible” the central bank was considering a rate hike, given low inflation and a strong dollar.
Global growth forecasts for next year are being trimmed as a trade war between the biggest economies bites and markets reel from a volatile 2018. Meanwhile, political uncertainty still grips investors. There has been another round of personnel changes within the Trump administration, threats of a government shutdown and confusion remains over Britain’s future relationship with the European Union.
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The Fed holds its final policy meeting of 2018 on Tuesday and Wednesday. The rate decision will be followed by a press conference with Chairman Jerome Powell.
The Bank of Japan’s monetary policy decision is due Thursday, followed by a briefing from Governor Haruhiko Kuroda. A Bank of England decision is also Thursday.
Chinese President Xi Jinping marks the 40th anniversary of Deng Xiaoping’s opening of the nation’s economy to the world with a keynote speech at a conference scheduled for Tuesday.
A partial U.S. government shutdown could start this week if lawmakers and Trump fail to resolve how much money to allocate for Trump’s wall along the Mexican border.
And these are the main moves in markets:
Japan’s Topix index fell 1.7 percent as of 1:23 p.m. in Tokyo.
Australia’s S&P/ASX 200 Index slid 0.9 percent.
Shanghai Composite Index fell 1.1 percent.
Hong Kong’s Hang Seng Index dropped 0.9 percent.
S&P 500 futures rose 0.2 percent. The S&P 500 Index fell 2.1 percent as of 4 p.m. New York time.
The MSCI Asia Pacific fell 0.9 percent.
The yen climbed 0.3 percent higher to 112.49 per dollar.
The offshore yuan rose 0.1 percent at 6.8924 per dollar.
The Bloomberg Dollar Spot Index lost 0.1 percent.
The euro traded little changed at $1.1354.
The British pound was at $1.2629.
The yield on 10-year Treasuries slipped one basis point to below 2.85 percent.
Australia’s 10-year bond yield fell about four basis points to 2.41 percent.
West Texas Intermediate crude declined 1.3 percent to $49.22 a barrel, on track for a third day of declines.
Gold added 0.2 percent to $1,248.89 an ounce.
— With assistance by Sarah Ponczek, and Vildana Hajric