Asia
Global markets weakened on Thursday in response to the Federal Reserve’s plans to continue tightening monetary policy. This movement lower was enough to neutralise the recent attempt at a recovery in China, Hong Kong and Japan stock markets.
President Trump’s comments at the UN were not supportive of this recovery continuing. Once again, geopolitics have gain the upper hand in investors’ minds. Accusing China of attempting to interfere in the upcoming mid-term elections, Trump said: “They do not want me - or us - to win because I am the first president ever to challenge China on trade."
Japan’s Nikkei failed to hold above the key technical level of 24,000 points.
Europe
Markets in Europe drifted lower in keeping with the global mood.
In economics, the decision to hold the UK Budget on 29 October, essentially a month earlier than expected, has caused a minor stir in the financial media. For once the Budget announcement is being overshadowed by negotiations over Brexit, which enter their critical stage in early November.
The pound has remained within a range against the dollar this week between $1.31 and $1.32 and has retreated today. The move lower has not been enough to stimulate the FTSE 100 as the fallout from the Salzburg summit did last week.
North America
Markets have reacted hawkishly to the Federal Reserve’s latest statement on interest rates, although there are some alternative ways of reading the announcement, according to Morningstar analysts. Morningstar’s Eric Compton said: “The FOMC’s statement maintained essentially all its language, upholding that further hikes would be gradual and that the risk outlook remains roughly balanced. However, we did notice that the committee removed language that had previously stated that the stance of monetary policy remains accommodative.
"This suggests to us that the FOMC is getting closer to what it views as a neutral rate in the current environment, and may not be certain they are still being accommodative even as the market still expects many more rate hikes.”
Carl Eichstaedt, fixed income portfolio manager at the Legg Mason affiliate Western Asset, said:
““There was something for both bulls and bears to point to – for the bulls like Western Asset, we would highlight the removal of the word “accommodative” from the statement as a sign that the economy is strong enough to no longer need support from the central bank.
“However, the bears would highlight that interest rate expectations are unchanged, as shown by the Fed’s dot plot, suggesting the members do not currently foresee a shift in the path of monetary policy.”
Still, President Trump asserts that he is not happy with the Fed raising rates again, reiterating previous comments made.
There are only two Fed meetings this year so the central bank will have to act in November or December to fulfil the four rate rises expected by the consensus.
