Global Shares Hold near Record Peak ahead of Fed

Markets are almost certain the Fed will taper but are looking to see if policymakers will give any hints about the possibility of interest rate hikes next year.

MSCI’s all-country world index, which tracks equity performance in 50 nations, was down 0.01%, just off the record high it hit on Tuesday as European U.S. shares surged on strong corporate earnings. [.N][.EU]

“While confidence remains that the Fed will begin its taper, there is scepticism around just how hawkish they will be on the rate hike front,” said analysts at Westpac in a morning note to clients.

Fed officials are trying to maintain a balance between raising rates to ensure inflation remains contained and giving the economy as much time as possible to restore the jobs lost since the pandemic.

European and U.S. futures pointed to a marginally softer open, with pan-region Euro Stoxx 50 futures slipping 0.1%, and FTSE futures losing 0.17%.

U.S. S&P 500 e-minis, were down 0.14%.

In Asia, the regional benchmark has been trending down since early this year, and is off more than 13% from its February peak, as it struggles to rebound from sweeping regulatory changes in China in the summer, which roiled sectors from property to technology.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.33% on Wednesday, weighed by declines in Hong Kong and mainland China. Japanese markets were closed for a public holiday.

On Thursday, the Hong Kong benchmark lost 1% and Chinese bluechips shed 0.72%. Investors are now looking ahead to a major Chinese Communist Party gathering to be held Nov. 8-11.

“Shares in Hong Kong have been weakening as investors wait to see whether there will be indications about any more regulatory changes at the meeting next week,” said Steven Leung executive director for institutional sales at UOB Kay Hian in Hong Kong.

Adding to jitters, new locally transmitted COVID-19 cases in China spiked to a near three-month high and Premier Li Keqiang warned of downward pressure on the economy.

Moves in currency markets were muted on Wednesday, and the dollar kept near recent highs against the yen and euro.[FRX]

The Aussie dollar was also steady, having dropped 1.2% against the dollar a day earlier after more dovish remarks from the Reserve Bank of Australia, even as it abandoned its short-term yield target.

Also in central bank news, the Bank of England on Thursday could become the first of the world’s major central banks to raise rates after the coronavirus crisis.

U.S. benchmark 10-year Treasury yields were steady at 1.5541%, a little off last month’s recent top of 1.7%.

Oil prices fell on Wednesday as industry data pointed to a big build in oil stocks in the United States, the world’s largest oil consumer, and as pressure mounted on OPEC to increase supply. [O/R]

Brent crude fell 1.2% to $83.74 a barrel while U.S. crude tumbled 1.5% to $82.65 a barrel.

Spot gold slipped 0.35%. [GOL/]