SINGAPORE- Stocks stalled while the dollar drifted higher on Wednesday as investors made last-minute adjustments to portfolios in the countdown to the year’s final salvo of central bank meetings, while news of a potential Nissan-Honda tie-up lifted car stocks.
S&P 500 futures were flat in the Asia session after the index fell in US trade. European futures and FTSE futures were about 0.2 percent lower. MSCI’s broadest index of Asia-Pacific shares outside Japan was huddled near a two-week low and had inched 0.2 percent higher by afternoon.
The dollar strode to a one-year high against the Australian dollar and a two-year top against the New Zealand dollar as expectations firmed for the Federal Reserve, later on Wednesday, to signal a cautious approach to rates in 2025.
Traders are almost certain the Fed will move the funds rate window 25 basis points lower – from its current 4.5-4.75 percent range – but lift its long-run interest rate projections.
“The market reaction is likely to focus on the communication and potential guidance for further cuts,” said David Doyle, head of economics at Macquarie.
“We foresee a hawkish shift in the dot plot, consistent with the movement in market expectations since the last update in September.”
Then, Fed members’ median projection for rates was for 3.4 percent at the end of next year and for a long-run neutral rate of 2.9 percent – well below current market estimates for a long-term neutral rate of around 3.8 percent.
Traders have been driving up US yields and the dollar accordingly, with benchmark 10-year yields touching one-month highs around 4.4 percent overnight, before settling at 4.39 percent.
Moves in the Asia session were small, muted by the upcoming Fed meeting and central bank meetings in Japan, Britain, Norway and Sweden on Thursday.
But currency markets reflected the dollar’s broad strength, with the Australian dollar slipping to $0.6313 and the New Zealand dollar down to $0.5735.
