In U.S, attention today would be on the FOMC as it is all but certain to announce tapering of its asset purchasing program, with the main questions being timing and pace. The consensus is the Fed will start in November and wrap up by mid-2022, reducing Treasuries by $10 billion a month and MBS by $5 billion. There’ll be no calendar-based language on when rate increases might follow, Bloomberg Economics said. But futures prices and an increasing number of economists predict two 25 bps hikes by the end of 2022. Benchmark yields on 10-year U.S. debt is holding well below last week’s highs while stock and currency market volatility, though slightly higher, remain pinned near 2021 lows. The S&P 500 rose 0.37%, the Dow Jones rose 0.39% while the Nasdaq 100 rose 0.34%.
Asian stocks were mostly lower as traders awaited the Fed’s roadmap. Hong Kong and South Korea underperformed, though an iron-ore rebound bolstered commodity-reliant Australia. Hong Kong’s Hang Seng index HIS dropped 0.9% while the Shanghai Composite index SHCOMP lost about 0.6%. Comments by Chinese Premier Li Keqiang about downward pressure on the economy also rattled investors. In remarks carried by the official Xinhua News Agency, Li said the government needs to provide more support for smaller companies, reduce taxes and fees, “do a good job in ensuring the supply and price stability of electricity and coal and take strong measures to support manufacturing.” Most Asian countries have also kept their monetary policy loose to deal with the fallout from pandemic-related shutdowns and travel restrictions. But some central banks have begun easing up on the accelerator in response to surging prices.
Zambia’s finance minister said plans to refinance a $750 million Eurobond that matures in September with money set aside in the 2022 budget may fall away as restructuring talks with external creditors progress. Situmbeko Musokotwane surprised investors on Sunday when he said that the government, which a year ago became Africa’s first pandemic-era sovereign defaulter, and started a restructuring process, planned to raise more debt next year to service the $750 million bond. The dollar notes gained for a 6th straight day to trade at 76.7 cents on the dollar by 2:42 p.m. in London. “We put money in the budget to refinance the first Eurobond, but that is not to say that this is actually going to be done,” he told creditors in a virtual meeting Tuesday. “We recognize that if we did so, it means that this particular Eurobond will get favorable treatment compared to everybody else.” The provision was made to make sure that the budget recognizes what is pending and how it must be dealt with, the minister said.
Oil extended losses as Joe Biden increased pressure on OPEC+ to boost supplies ahead of the group’s meeting tomorrow. OPEC+ is expected to stick with plans for a modest supply increase, shunning calls to cool the price rally. In another bearish signal, the API reported U.S. crude stockpiles gained 3.59 million barrels last week. WTI sank more than 1%, while Brent also declined falling 1.7% to $83.27/bbl.