US stocks climb before Fed decision; Treasuries steady

Bloomberg

US stocks climbed as investors waited to see whether Federal Reserve policy makers would strike a dovish stance when they reveal their rate decision on Wednesday.
The S&P 500 Index edged higher in early trading as the Stoxx Europe 600 Index looked set to snap a four-day losing streak. Still, a cautious tone prevailed after executives from FedEx warned about a slump in global trade. Treasuries were in a holding pattern before the Fed announcement, when the central bank is expected to deliver the fourth rate hike of the year while signaling a slower approach to increases in 2019.
Italian debt surged after the European Commission decided against launching a disciplinary procedure over the country’s budget. Crude oil rallied after the biggest three-day slump since 2016. The dollar slipped.
Amid the recent volatility in stocks and other risky assets, many investors are looking to Fed Chair Jerome Powell to attempt to limit the fallout from an interest rate increase by delivering a less hawkish message than in recent meetings. That might also help placate President Donald Trump, who stepped up pressure on the central bank to avoid more tightening.
“One thing I would like to see is what people are calling a dovish hike,” Ronald Temple, head of US equity and co-head of multi asset at Lazard Asset Management, told Bloomberg TV.
Beyond the Fed, trade and politics remain the dominant themes. Unless Trump and Congress reach a deal, spending authority expires for a swathe of the US government. Meanwhile, Treasury Secretary Steven Mnuchin said America and China are planning to hold meetings in January to negotiate a broader trade truce.
Elsewhere, the yield on benchmark Japanese notes slipped to within striking distance of
0 percent before a rapid turnaround as the surge in
demand triggered a margin call. Asian shares were mixed following a disappointing market debut for SoftBank Group’s Japanese telecom business. The euro strengthened, while emerging-market shares climbed.
The Fed wraps up its final policy meeting of 2018. The rate decision will be followed by a press conference with Chairman Jerome Powell. The Bank of Japan’s monetary policy decision is due on Thursday, followed by a briefing from Governor Haruhiko Kuroda. A Bank of England decision is also on Thursday.
The S&P 500 Index rose 0.1 percent in New York. The Stoxx Europe 600 Index increased 0.3 percent. The Nikkei-225 Stock Average fell 0.6 percent to the lowest since March. The MSCI Emerging Market Index gained 0.7 percent.
The Bloomberg Dollar Spot Index dipped 0.3 percent. The euro jumped 0.5 percent to $1.1417, the strongest in almost four weeks. The Japanese yen gained 0.2 percent to 112.25 per dollar, the strongest in almost eight weeks. The British pound rose 0.1 percent to $1.2655.
The yield on 10-year Treasuries dipped one basis point to 2.81 percent. Germany’s 10-year yield was little changed at 0.24 percent. Britain’s 10-year yield was little changed at
1.28 percent. Italy’s 10-year yield plunged 17 basis points to 2.77 percent.