USA stocks edge higher in afternoon trading; oil prices slide

Gladys Abbott
September 23, 2017

"In my view, they need to normalise policy", he said.

Elevated risk appetite in Europe meanwhile saw the gap between Portuguese and Italian 10-year government bond yields narrow to levels not seen since the start of the eurozone debt crisis of 2010-2012. But they still are forecasting another increase of 0.25 of a percentage point by the end of the year - a signal they think the economy is still on solid ground. The rise in bond yields augurs for higher real interest rates they can charge customers for loans, which in turn should pad these banks' bottom lines.

The Fed's next meeting is scheduled for October 31 and November 1, but the Fed is unlikely to raise rates any sooner than its final meeting of the year, in mid-December.

Another rate hike is unlikely this time around as the disruptions caused by Hurricanes Harvey and Irma have distorted the overall picture of the USA economy (witness the spike in initial jobless claims in what has been an otherwise uninterrupted downtrend).

While the Fed has said the process will be very gradual, to avoid upsetting financial markets, it will act as a slight tightening of monetary policy akin to an interest rate hike.

In its statement that followed a two-day meeting, the Fed, as expected, left rates unchanged and said it would begin in October to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities.

While the start of the process to shrink the Fed's balance sheet is an important step in the normalization of post-crisis monetary policy, the details of when it will get under way will probably be a non-event for financial markets, said Gennadiy Goldberg, interest-rate strategist at TD Securities in NY.

"Following some slightly disappointing recent data, particularly softer than expected inflation, there were concerns that the Fed would start to revert to a more cautious strategy".

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With the unexpected decrease, existing home sales fell to their lowest annual rate since hitting 5.34 million last August. Toshiba stock was up 0.32 percent in early trade.

Fed chair Janet Yellen said in a press conference after the end of the meeting that the fall in inflation this year remained a mystery, adding that the central bank was ready to change the interest rate outlook if needed. "ORCRP000236-topic.html" class="local_link" >Adobe Systems fell 4.5 percent.

Fed policymakers have for months downplayed stubbornly low inflation as the result of temporary factors, but core CPI has not risen above 2.3 percent in six years.

Western Digital slipped more than 4 percent after Japan's embattled Toshiba agreed to sell its semiconductor business to a group led by private equity firm Bain Capital.

The Japanese yen was weaker by 0.5% at 111.40 per dollar.

KEEPING SCORE: Japan's benchmark Nikkei 225 added 0.7 percent to 20,453.68 as the yen weakened against the dollar, benefiting shares of exporters. Brent crude, used to price global oils, gained 55 cents to $55.69 per barrel in London.

The iPhone maker's shares fell 2.5 percent and was the biggest drag on all three indexes after reports that the company admitted to connectivity issues with its latest smartwatch.

The Australian dollar was 0.15 percent higher at $0.7972 AUD=D4 .

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