Trading in global stocks was broadly muted Wednesday, with investors appearing to be holding off ahead of the Federal Reserve announcement later in the day.
The Stoxx Europe 600 was flat shortly after markets opened, with the biggest losses in the food and beverage sector. Asia markets were mixed, as Chinese markets advanced and Japan’s Nikkei Stock Average remained little changed after closing Tuesday at its highest since August 2015.
Markets were mostly calm Wednesday, with investors showing little reaction to U.S. President Donald Trump’s speech at the United Nations Tuesday in which he threatened to “totally destroy” North Korea if forced to defend the U.S. or its allies.
“If the markets actually thought there will be a nuclear war with North Korea, they wouldn’t be trading where they are now. So the markets, rightly or wrongly, are dismissing that scenario,”
With no response from Pyongyang to Mr. Trump’s threats, investors seemed to turn their attention to the Fed’s meeting, where the central bank is expected to announce that it will keep rates unchanged and that it will start unwinding its $4.5 trillion balance sheet.
“Any change in the Fed’s intentions are still important market signals, and could be felt in asset prices,” said Rob Carnell, head of Asia research at ING, pointing to the uncertainty over the pace of interest-rate increases.
Many have been skeptical the Fed will increase rates again in 2017, citing subdued inflation readings and concerns around the economic impact of major summer storms. However, data last week showing a bigger-than-expected increase in U.S. consumer prices gave a fresh boost to investor expectations for one more rate rise by year-end.
Federal-funds futures, used by investors to place bets on the Fed’s rate-policy outlook, showed Wednesday a 58% chance that the central bank will raise interest rates again by December, according to CME Group data, up from 41% a week ago.
The WSJ Dollar Index, which measures the greenback against a basket of other currencies, fell 0.1%.
Meanwhile, the 10-year Treasury yield was nearly unchanged at 2.238%, according to Tradeweb, compared with 2.239% on Tuesday. Yields rise when prices fall.
Japan’s Nikkei Stock Average was flat, after jumping 2% to its highest close since August 2015 Tuesday, and Hong Kong’s Hang Seng Index was up 0.3%. Meanwhile, South Korea’s Kospi and the Australian S&P/ASX 200 were down 0.2%. The Shanghai Composite Index added 0.2% and the Shenzhen Composite was up 0.9%.
Electric car maker BYD, which counts billionaire Warren Buffett among its investors, surged amid the frenzy over green vehicles in China. BYD has jumped over 50% since last Monday, when government officials said they planned to phase out traditional gas combustion vehicles in the country. Fellow car maker Geely Auto hit a fresh record, rising 5.1%.
Among haven assets, gold prices were 0.4% higher at $1,316.20 a troy ounce, while the Japanese yen was up 0.1% against the U.S. dollar.
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