A Brief About The Global Markets, Eyes On Fed’s Decision

  • Sep 26, 2018 AEST
  • Team Kalkine
A Brief About The Global Markets, Eyes On Fed’s Decision

US-China Trade Would Take Time To Settle

It seems like markets need to know that US-China trade fights would take time to settle down as both the countries are slapping tariffs on the imports. The cancellation of the trade talks clearly indicates that with this type of behavior the global markets would be witnessing the impacts of ongoing trade wars. The global economy might get derailed by the escalation of the trade disputes between the two countries. The market participants were hoping that the trade fight might get resolved but the US President’s imposition of $200 billion of tariffs on the imported goods from China erased that ray. In retaliation, China slapped tariffs on $60 billion of the US imports indicating that China would not back off.

The US president’s protectionist policies might impact the American companies which are garnering their revenues from China. However, with the imposition of tariffs by Trump as well as warning that they could go even higher and slap an additional $267 billion of tariffs marks an entry of the trade dispute into the new level. In 2017, China exported a total $505.4 billion of goods to the United States as per the US Census Bureau. However, the US exported $129.8 billion of goods to China during the same year.

Federal Reserve’s Two-Day Meeting

The US economy is witnessing a strong momentum and the broader markets would not be wrong if they expect a rate hike in the Federal Reserve’s two-day meeting which kicked off on September 25, 2018. The market participants expect a rate hike of 25 bps (basis points) in the meeting which would end on September 26, 2018. The Fed’s hawkish monetary stance began in December 2015 and since then the central bank has been raising the rates as and when it deems fit. If the Fed announces a rate hike by 25 bps, the target range would be 2-2.25%.

The Federal Reserve’s play with the interest rates directly impacts the 2-year Treasury note which witnessed the boost on the expectations that the Fed might go for interest rate hike. The yield on 2-year Treasury note saw a strong boost to 2.84% marking the highest level over the time span of 10 years.

Australian Markets Seems To Be Waiting For The Fed’s Decision

The Australian markets remained quiet on September 26, 2018 primarily because of the awaited decision of the Federal Reserve in regard to the interest rates. The investors expect that the Federal Reserve might get aggressive position can reflect a more hawkish tone in the meeting. However, a marginal decline was also witnessed in the Australian dollar or AUD. However, on September 25, 2018, the energy stocks were broadly positively impacted on the back of the strong upward momentum in the oil prices after OPEC announced that an immediate increase in the production is not required. In addition, materials space also witnessed the positive impact yesterday because of the positive outlook in regard to the global growth. The materials, as well as energy stocks, were the primary focus area on September 26, 2018. The energy witnessed the strong uptrend.

After market close, the top five stocks which gained momentum intraday were Afterpay Touch Group Limited (ASX:APT) which rose 6.06% while other stocks like Vocus Group Limited (ASX: VOC), Qube Holdings Limited (ASX: QUB), Appen Limited (ASX: APX) and St Barbara Limited (ASX: SBM) rose 4.886%, 4.264%, 4.255%, 3.636%, respectively. APT was up as it bagged a deal with Smiles Inclusion for providing its 'buy now and pay later' scheme at Smiles’ 52 dental practices. However, Australian Pharmaceutical Industries Limited (ASX: API) and Syrah Resources Limited (ASX: SYR) declined 9.763% and 5.106%, respectively. API was down because of the underperform rating is given by Credit Suisse from neutral. An event that impacted Australian markets was higher crude oil prices.

Chinese Markets Witnessed Negative Momentum

The stock markets in China witnessed the downtrend yesterday. It seems like the Chinese markets have tied their fate with the policymakers as the economy might witness a strong negative momentum on the escalation of the trade disputes. The future of the Chinese markets is in the hands of the policymakers as they need to figure them out the ways which could help them in sustaining the long-term growth.

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