Wednesday was a rather calm day on stock markets around the world. Investors are being cautious and rather reserved, which is justified having in mind the happenings in the past few days, and also the ones expected in the next ones. The euro zone partners are about to make a decision whether to help Greece once again and postpone crisis, or to ban the country out. The U.S Federal Reserve is about to announce their rate hike after the crisis in their own yard.
With much of it still guesswork though, Europe’s main bourses were a shade lower INDEXE, Wall Street was pointing to a slightly higher start ESc1, while the euro .DXY and dollar .DXY were nudging around in tight ranges.
In the morning, there a couple of actions the traders preferred, like the Swiss franc and the German government bonds. These are stocks that are generally safe, so cautiousness was there from the beginning of the day. Even in their case, since speculations started about the Fed announcement, trading was brought to a minimum.
The list of potential hike dates at the moment is stretching from September until the end of the next year, so everyone involved in stock markets hopes that it will be narrowed today. A press conference is scheduled for 2, 30 pm, by Chair Janet Yellen.
Policymakers in the Fed will have a tough job to decide if consumer spending data’s, reports about healthier and stronger job status in the country recently, and the wages incensement are a good enough reason to raise the rates for the first time in almost ten years. Richard Clarida, global strategic advisor at bond fund giants PIMCO, gave his opinion “At the moment, markets are pricing less than thirty percent probability the Fed hikes in September, but more than sixty percent probability they hike in December. I think that Yellen would be happy, if after her press conference, the stock markets price in a higher probability of a September”.
Wage growth reports in Britain made the U.S dollar to step down to the sterling at $1.57. On the other hand, the U.S dollar kept its advantage ahead of the euro $1.1258 and the yen $123.97.
A Fed hike is expected everywhere, because it will end an era of easy money that drove global stocks and major bond prices to highs like never before. No matter when it comes, it will be a turning point for global markets all over the world.
The Greek problem remains one of the major issues for the stock markets. The end of the month is coming with great speed, and the relations between Athens officials and the IMF creditors are worse than ever. There is almost no hope that they will come to an agreement, and by that, avoid a big crisis situation in the euro zone. Although a meeting between the euro zone finance ministers is scheduled for Thursday, there are already negotiations for another one this weekend.
The National Bank of Greece issued a press release with a harsh warning: “failure to clinch a deal would mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the countries exit from the euro area and, most likely, from the European Union.” “ It is a historical imperative to achieve an agreement with the euro zone partners, and we must not ignore that “.
Despite a higher start, Portuguese, Italian and Spanish bond yields dipped for a second day in a row. They started the week with a multi month high, but now are showing signs of declining. But Portugal, which was in a similar position like Greece and had to be rescued by the IMF and the European Union, saw their borrowing costs rise a lot after a debt auction. Costs are now higher for Germany also, after they had their own auction.
Since the start of the year, the Shanghai market has gained fifty percent, and by that, made the Chinese stocks best in the world in U.S dollar terms. MSCI’s index of Asia-Pacific shares outside Japan.MIAPJ0000PUS gained 0.8 percent, moving away from a three-month low on Tuesday as Chinese stocks rallied by more than 2 percent from the day’s lows.