Most SE Asia stocks fall on profit-booking ahead of Fed meet

Gladys Abbott
September 21, 2017

In his first speech before the United Nations General Assembly on Tuesday, "the United States has great strength and patience, but if it is forced to defend itself and its allies, we will have no choice but to totally destroy North Korea". Given the underlying instruments - Treasuries and agency mortgage-backed securities - it would appear that a balance sheet unwind announcement should help buoy long-end U.S. yields. They expect Fed officials would leave the door open for a rate increase at their December 12-13 meeting.

ANALYST TAKE: "While we're not expecting any surprises out of the meeting, in terms of another rate hike for example, we should learn a lot about how the Fed plans to tighten monetary policy going forward and that will determine how USA yields and the dollar respond", said Craig Erlam, senior market analyst at OANDA.

USA crude oil prices CLc1 edged up 2 cents to settle at $49.91 a barrel, after hovering near multimonth highs. The yield fell to 2.016 percent on September 8, the lowest since November 10, 2016.

On Thursday, the Bank of Japan will also hold a regular policy meeting, and is widely expected to maintain the status quo as inflation remains stubbornly weak despite a modest economic recovery.

Political uncertainty may have a part to play in the BOJ's thinking. The move will gradually increase long-term borrowing rates. Core inflation was revised modestly higher to 1.3% from 1.2%, which may provide additional ammunition for the European Central Bank to announce it is soon to begin winding down its large scale asset purchases.

Meanwhile, the 10-year Treasury yield was almost unchanged at 2.238%, according to Tradeweb, compared with 2.239% on Tuesday. The three indexes hit record highs on Tuesday.

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"You just had that little momentum spurt after it went through 2,500 but it is kind of running out of steam and is going to bide its time until Wednesday, when they listen to Janet" said Ken Polcari, director of the NYSE floor division at ONeil Securities in NY. Kellogg was off 90 cents, or 1.4 percent, to $64.97, while Campbell Soup lost 88 cents, or 1.9 percent, to $46.44. All are expected to leave policy unchanged but forecasters expect Australian policymakers to strike a more hawkish tone following stronger recent economic activity.

Indonesia stocks rose 0.2%, helped by gains in energy and financial stocks, while an index of Indonesia's 45 most liquid stocks rose 0.3%.

Any heightened expectations of a rate increase could fuel a rotation and "will certainly change leadership" among market sectors, favouring financials, industrials and materials, according to Jim Paulsen, chief investment strategist at The Leuthold Group.

The pan-European FTSEurofirst 300 index closed up 0.1 percent, while MSCI's gauge of stocks across the globe gained 0.20 percent. Low inflation and impressive growth/low unemployment have posed a perplexing conundrum for monetary policymakers who have chose to trust in the data and start tightening despite the fact that inflation remains well below target.

Banks withdrew 1.01%, food and drug retailers were off 1.2%, platinum miners were down 1.33% and gold miners had fallen 1.44%.

Treasury yields briefly rose earlier on Tuesday after data showed that US import prices recorded their biggest increase in seven months in August as the cost of petroleum surged and there were also signs of a pickup in underlying imported inflation.

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