Logo of Phnom Penh Post newspaper Phnom Penh Post - Most markets retreat, focus on Fed decision

Most markets retreat, focus on Fed decision

Content image - Phnom Penh Post
The US Federal Reserve’s (Fed) policy meeting this week will be closely followed as it prepares to taper its bond-buying programme, while traders will also be looking for clues about its plans for interest rates. AFP

Most markets retreat, focus on Fed decision

Stock markets mostly fell on November 2 as traders held back ahead of this week’s key central bank meetings that are expected to see officials begin withdrawing their vast pandemic-era financial support, while keeping a wary eye on inflation and supply chain snarls.

Another record close on Wall Street provided a fruitful lead thanks to a strong earnings season that has seen the vast majority of companies beat expectations despite concerns about the impact of surging input costs and spiking Covid infections in the third quarter.

However, a promising start in early trade gave way to selling as traders remain on edge about the outlook with Hong Kong and Shanghai weighed by the latest outbreak in China that has led authorities to reimpose strict containment measures.

Similar moves in the country earlier this year led to a sharp drop in economic activity and dragged growth down.

Hong Kong, Shanghai, Sydney, Tokyo, Wellington, Mumbai and Jakarta all fell while Taipei was marginally down. Singapore, Seoul, Manila and Bangkok edged up.

London and Paris opened lower but Frankfurt moved up.

Still, analysts for now remain buoyant about the outlook for markets.

“We are now in the midst of an early ‘January effect’ and I expect that this will continue through Thanksgiving,” said markets strategist Louis Navellier.

“However, December is also a seasonally strong month and January is typically stronger, so we have three months of seasonal strength to look forward to.

“In the meantime, we are still in the midst of wave after wave of better than expected third-quarter earnings announcements, so enjoy the ride.”

Attention now turns to the central banks’ policy meetings this week.

With several countries already starting to lift interest rates, traders are now preparing for the end of the cheap cash era, which has helped propel markets to record or multi-year highs.

On November 2 the Reserve Bank of Australia said it would no longer artificially maintain low yields on three-year bonds, making it the latest to step back from its easy money strategy, while the Bank of England is tipped to hike borrowing costs on November 4.

But the US Federal Reserve’s (Fed) November 3 gathering is the main focus of attention. US authorities are forecast to start tapering their bond-buying programme this month but observers said the board’s timeline on raising borrowing costs will be top of the agenda.

The main focus of the meeting “will be much more on the Fed’s inflation stance than tapering”, Steve Englander, of Standard Chartered Bank, said.

“The elephant in the room is headline and underlying inflation, which are higher than the [Fed policy board] was anticipating.”

And Jeffrey Halley of Oanda said tapering monetary policies was needed now.

“I have no argument with leaving policy rates around the world at record lows, despite the recovery noise in the data globally, the recovery remains fragile,” he said in a note.

“What needs to end is the quantitative easing … which while necessary as a monetary tactical strike during the height of the pandemic, has quickly reached its use-by date.”

The release of US employment figures on November 5 will also be followed for a fresh idea about the impact of inflation and Covid infections on the jobs market.

MOST VIEWED

  • Angkor lifetime pass, special Siem Reap travel offers planned

    The Ministry of Tourism plans to introduce a convenient, single lifetime pass for foreign travellers to visit Angkor Archaeological Park and potentially other areas. The move is designed to stimulate tourism to the culturally rich province of Siem Reap as the start of the “Visit

  • Exclusive interview with Josep Borrell Fontelles, High Representative of the EU

    CAMBODIA is hosting the 55th ASEAN Foreign Ministers’ Meeting (AMM) and Related Meetings this week with top officials from the US, China, and Russia and other countries in the region slated to attend and to meet with face-to-face with their counterparts on the sidelines. In

  • ASEAN Foreign Ministers’ meet commences, Taiwan issue possibly on table

    The 55th ASEAN Foreign Ministers’ Meeting (AMM) and related meetings hosted by Cambodia kicks off in Phnom Penh on August 3, with progress, challenges, and the way forward for the ASEAN Community-building on the table. Issues on Taiwan, sparked by the visit of US House Speaker

  • Pailin longan winery tries to break through to the big time

    Longan aren’t quite as glamorous as some fruits. They don’t have the star-power of mangos or generate the excitement of a pricey seasonal niche fruit like the pungent durian. Unlike bananas or oranges, which are known and loved everywhere, longan remains a decidedly

  • Recap of this year’s ASEAN FM meet and look ahead

    This year’s edition of the ASEAN Foreign Ministers’ Meeting (AMM) hosted by Cambodia comes against the backdrop of heightened global tensions and increasing rivalry between major powers that have been compared to the animosity of the Cold War era. The following is The Post’

  • Siem Reap action plan for tourism in motion

    The action plan for the Siem Reap Tourism Development Master Plan (2022-2023), focusing on six priority destinations, has been implemented to boost tourism and regain pre-Covid tourist numbers in the province. The action plan sets out 17 strategies and 37 implementation activities for: Angkor Archaeological Park, Phnom