Black Friday Sale! Save huge on InvestingProGet up to 60% off

GLOBAL MARKETS-Stocks, commodities fall ahead of FOMC minutes

Published 10/12/2010, 06:43 AM
GC
-
HG
-

* FOMC minutes watched for more clues on size, timing of QE

* World equities, commodities fall

* Dollar near 15-yr low vs yen, up against other currencies

By Dominic Lau

LONDON, Oct 12 (Reuters) - World stocks and commodity prices fell on Tuesday before Federal Reserve minutes that should give clues on the timing and size of more U.S. stimulus, while the dollar hovered near a 15-year low against the yen.

The Fed's comments at its Sep. 21 meeting that it stood ready to provide more support for the economy have boosted stock markets worldwide and commodity prices, especially gold which is seen as hedge against long-term inflation, on expectations of another round of money printing.

The dollar was sold sharply as market players factored in the prospect of more quantitative easing, though the U.S. currency remains weak against the yen, which tends to benefit from global growth concerns.

However, pending details of the Fed's last meeting from the minutes, expectations in some quarters are now being pared back, particularly after Janet Yellen said in her first speech as vice chair of the Fed late on Monday that low interest rates could contribute to financial bubbles even if they were not a primary culprit.

"The market is moving to pare back expectations of QE by the Fed," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi.

"The Fed minutes will be crucial as we could learn more about the size of potential asset purchases."

A Reuters poll of U.S. primary dealers conducted last week forecast the size of the new round quantitative easing at between $500 billion and $1.5 trillion.

World stocks measured by MSCI All-Country World Index fell 0.7 percent, though the Thomson Reuters global equity index was flat.

U.S. stock index futures dropped 0.7 to 0.8 percent, indicating a weaker start for Wall Street, while Europe's FTSEurofirst 300 eased 0.8 percent.

Japan's Nikkei average fell 2.1 percent, dragged lower by a climb in the yen to 15-year highs against the dollar, with investors nervous to see whether authorities will intervene in the currency markets.

The dollar eased 0.1 percent to 82.04 yen, though the greenback was up 0.4 percent against a basket of currencies.

The euro was down 0.4 percent at $1.38.19.

Countries from Latin America to Asia have complained that the Fed's push toward renewed monetary easing is strengthening their currencies unduly against the dollar, hurting their competitiveness.

COMMODITIES WEAKER

Gold lost 0.6 percent after last week hitting a record high of $1,364.60 per ounce, and copper slipped 0.2 percent, while oil fell 1 percent.

"The minutes will be important in setting the scene. We'll see whether the tone is about downside risk," said Bill Dinning, head of strategy at Aegon Asset Management in Edinburgh. "But three weeks (the time until the next Fed meeting) in these markets is an eternity. And clearly there is a debate going on."

However, global demand for raw materials remained anaemic. POSCO, the world's No. 3 steelmaker, reported a weaker-than-expected 9 percent rise in quarterly profit and cut 2010 profit forecast by 7 percent.

Investor interest shifted to government bonds, pushing down yield premiums on benchmark 10-year U.S. Treasuries 4 basis points at 2.353 percent to their lowest level since January 2009, and those on 10-year German Bunds by 5 basis points to 2.223 percent. (Additional reporting by Tamawa Desai, Brian Gorman and George Matlock; Graphics by Scott Barber; Editing by Ruth Pitchford)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.