Future Climbs, Dollar Declines Before Fed Decision

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(Bloomberg) – European stocks wiped out early gains as well as US stock index futures after the OECD presented gloomy prospects for the global economy and the top US infectious disease specialist warned that the coronavirus epidemic was far from over. The dollar remained near a three-month low against a basket of peers.

The Stoxx Europe 600 index fell while the S&P 500 futures reversed the gains. The OECD predicts a 6% contraction in the world economy this year. Earlier in Asia, the benchmarks fell in China and Japan. Hong Kong stocks fluctuated, while South Korea and Australia posted modest gains. Treasury yields fell slightly and crude oil fell.

The OECD assessment reminded investors that the economic crisis of the pandemic was far from over, even after employment figures in the United States seemed to indicate that a recovery was underway in most great economy of the world. As the Fed is expected to keep its interest rate unchanged, investors will be reassured that the central bank will continue to provide extraordinary support for the economy. Policymakers can also comment on the potential targeting of returns for certain Treasury maturities.

“The markets were cautious before the Fed meeting and the technical indicators are tight after the recent powerful rally,” said the strategists of Crédit Agricole CIB led by Jean-François Paren in a client note. “For the moment, it seems that the control of the yield curve is the necessary condition for the markets to recover more, but this may not be sufficient in itself because it also highlights the fragility of the system in which we are currently living. “

What to watch this week:

The next Fed policy decision is Wednesday. Managers should leave rates above zero. Eurozone finance ministers will meet on Thursday to discuss the EU’s recovery plan and the succession to the presidency of the Eurogroup.

Here are some of the main market developments:

Stocks

The Stoxx Europe 600 index fell 0.1% at 10:12 am London time, the outlook for the S&P 500 was little changed, the futures on the NASDAQ 100 index increased by 0.3 % and the MSCI Asia Pacific index increased by 0.3%.

Currencies

The Bloomberg Dollar Spot index fell 0.4%. The euro gained 0.2% to $ 1.134. The pound rose 0.3% to $ 1.276. The Japanese yen appreciated 0.4% to 107.35 per dollar.

Obligations

The yield on 10-year Treasury bills fell by two basis points to 0.80%. The yield on 30-year Treasury bills decreased by two basis points to 1.55%. The 10-year yield on Germany fell one basis point to -0.32%. Britain’s 10-year yield fell two basis points to 0.319%.

Raw materials

Brent crude oil fell 2.1% to $ 40.33 a barrel. Gold strengthened 0.3% to $ 1,719.69 an ounce. LME aluminum advanced 1.3% to $ 1,626 per metric ton.

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