Five Things You Need to Know to Start Your Day
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The Fed meeting begins, markets calm, and Deutsche Bank is said to offload some risk. Here are some of the things people in markets are talking about today.
While expectations of a rate rise announcement from the Federal Open Markets Committee tomorrow remain low, there are a few banks out there predicting tightening. Two of the Federal Reserve's primary dealers — Barclays Plc and BNP Paribas SA — are going against the crowd and forecasting that officials will hike rates. Other bond market players are expecting Chair Janet Yellen to wait until December to announce further tightening thanks to the recent bond market sell-off.
Bank of Japan
Ahead of the Fed decision, the Bank of Japan will release its monetary policy statement, typically between noon and 1:00 p.m in Tokyo (midnight ET), with a press conference from Governor Haruhiko Kuroda scheduled for 2:30 a.m. ET. Despite the central bank proving as hard to predict as ever, investors are expecting it to do something to ease policy further. The lack of clarity, the timing of the meeting so close to the Fed decision, and two Japanese holidays this week, all mean that there has been less positioning than usual ahead of the decision.
Overnight, the MSCI Asia Pacific Index climbed 0.3 percent with Japan's Topix index adding 0.4 percent in its first trading session this week. In Europe, the Stoxx 600 Index was 0.2 percent higher at 5:57 a.m. ET as investors (yes, you guessed it) await the Fed. S&P 500 futures advanced 0.2 percent.
Deutsche Bank AG is having a bad week, with the company's shares down 12.5 percent in the past three days. With some hedge funds extending their bets against Germany's largest lender, the bank is said to be attempting to offload some risk from its balance sheet. Deutsche intends to securitize billions of dollars in corporate loans, structuring the deal as a synthetic collateralized loan obligation (CLO).
Authorities in China are attempting to open the private sector's wallets by selecting a new batch of about 1 trillion yuan ($150 billion) worth of public-private partnership projects. The welcome from investors for the new spending may be tempered by a report from CLSA Ltd. which estimates that losses from China's shadow banking system could be as high as $375 billion. Adding to the woes are the continued high costs of borrowing associated with stabilizing the yuan less than two weeks ahead of the currency's inclusion in the IMF's SDR basket.
What we've been reading
This is what's caught our eye over the last 24 hours.
- Why 'quantitative tightening' may again become a problem for markets.
- The ECB says weak trade is the new normal in post-crisis world.
- Four simple ideas for trading a possible Trump presidency.
- The real reason investors are backing the Tesla-SolarCity deal.
- Michel Temer vows to spend political capital on reforming Brazil.
- Women launch more than half of all new internet companies in China.
- Would you like to supersize that corporate bond sale?
- It's time to kill the 9-to-5.