Charting the Markets: Global Equities Rise Before the Fed
There's some respite for riskier assets as the Federal Reserve begins its two-day policy meeting. Emerging market stocks are rising for the first day in ten after the longest losing run since June. Europe's Stoxx 600 Index has rebounded from a five-day losing streak, the worst in over four months. It's not just a question of will the Fed raise rates, it's how any decision signals the pace of tightening thereafter that matters.
The dollar is falling against most of its major 16 peers. Investors have had time to adjust to the prospect of higher U.S. interest rates since Oct. 28, when the Fed signaled a December move was likely. A Bloomberg gauge tracking the performance of the dollar versus 10 leading global currencies has risen 8 percent this year. It's trading 1.3 percent below the record set on Nov. 30. Only the Swiss franc has outperformed the dollar in 2016, rising 1.4 percent.
The slide in commodities continues. The Bloomberg Commodity Index, which tracks 22 materials, has dropped to the lowest since March 1999. Further declines could be in the offing, according to Stephen Roach, a former non-executive chairman for Morgan Stanley in Asia. He warns: "China has been the most commodities-intensive story that the world economy has seen in the post-World War II period. Now China is shifting the model to more of a commodity-light, services-led economy." The Bloomberg Commodity Index has slumped 25 percent in 2016, its fifth consecutive annual drop and the longest losing run on record.
Aveva shares plunged as much as 37 percent after the U.K. software company ended merger talks with French manufacturer Schneider Electric. The two companies were unable to reach an agreement following extensive due diligence. Back on July. 20 they had agreed to combine industrial software units and create a business that helps design and operate engineering projects from nuclear power plants to diesel engines. On that day Aveva shares soared as much as 32 percent in London trading, the most in almost nine years. Aveva has its origins in Cambridge and introduced the world's first 3D plant design system in 1976.
Mark Barton is a presenter on Bloomberg TV. Follow him on Twitter @markbartonTV