Global traders limit bets ahead of US Fed, Bank of Japan meetings

Whenever the rate hike comes, analysts expect emerging market equities and currencies to take a hit

Gulf News

Dubai: Global markets remained calm yesterday ahead of Tuesday’s central bank meetings in the United States and Japan.

“Financial markets seem to have pressed the snooze bottom on Tuesday and are not willing to wake up until Wednesday,” Hussein Sayed, chief market strategist at FXTM.

The Dow Jones Industrial Average was 0.55 per cent higher at 18,220.60, while the S&P 500 was 0.33 per cent lower at 2,146.12.

The Euro STOXX 50 was 0.32 per cent higher at 2,977.80. Earlier in Asia, The Shanghai Stock Exchange Composite Index closed down 0.10 per cent at 3,023. The Hong Kong’s Hang Seng closed 0.08 per cent lower at 23,530.86.

Back home, the Dubai Financial Market General Index closed 0.85 per cent lower at 3,455.18, while the Abu Dhabi Securities Exchange General Index closed 0.41 per cent lower at 4,463.86. Qatar exchange index jumped more than 1 per cent to be at 10,256.52, after falling nearly 4 per cent in the previous session.

Ammunition

Following the whole debate about central bank’s lack of ammunition with which to boost growth, the Bank of Japan is expected not to expand its monetary stimulus program, while the US Federal Reserve is likely to keep the funds rates unchanged and stay guarded about the rate hike plans.

“It is pretty clear that the Fed won’t raise rates this week but they will surely use it to set the stage for December and beyond,” Luke Bartholomew, investment manager at Aberdeen Asset Management said. Traders are hinging on a 40 per cent probability of a rate hike in December. Whenever the rate hike comes, analysts expect emerging market equities and currencies to take a hit.

“If the US hikes rates, it is going to put pressure on emerging market assets including equities. If the interest rates goes up in the US, the return on dollar is better, so we expect investors to sell emerging market currencies and equities and buy the dollar,” said Sanyalaksna Manibhandu, director Research, National Bank of Abu Dhabi Securities.

For better returns, investors have been parking their funds in emerging market currencies in different assets classes including equities.

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