Wall St steady ahead of Fed meeting

The ASX is set for a soft open after offshore investors tried to avoid getting caught by any central bank moves.

Investors were hesitant to get caught on the wrong side of any moves by central banks in the US and Japan. Picture: AP Photo/Richard Drew.

US stocks and government-bond prices were little changed ahead of looming decisions from major central banks.

European stocks were mixed as investors also hesitated to make big bets ahead of two key rate announcements.

The Australian share market is set for a soft open after offshore markets failed to inspire, with ASX futures down 8 points at 6.30am (AEST).

Today and overnight (AEST), Federal Reserve and Bank of Japan meetings will conclude, and bank officials will announce any policy changes.

The Fed is widely expected to leave interest rates unchanged, but investors are watching to see if officials signal a rate rise in December.

Expectations for the Bank of Japan are mixed ahead of the bank’s comprehensive assessment of its expansive stimulus program. Investors are split on whether the bank will cut its rates further into negative territory, alter its bond purchases or signal a meaningful shift in monetary policy going forward.

“No one wants to be on the wrong side of any rate cuts or rate hikes if they happen,” said Mohit Bajaj, director of exchange-traded funds trading solutions at WallachBeth Capital, adding that volumes were light for US stocks on Tuesday. “People are sitting on their hands waiting for things to play out.”

The Dow Jones Industrial Average edged up 9.79 points, or 0.05 per cent, to 18129.96. The S&P 500 added 0.03 per cent and the Nasdaq Composite gained 0.1 per cent.

The yield on the 10-year US Treasury note fell to 1.687 per cent, according to Tradeweb, from 1.698 per cent Monday. The WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, was flat.

Shares of healthcare companies were some of the best performers Tuesday, boosted by biotechnology stocks. Biotech slumped earlier this year, but recently the group has rebounded.

The Nasdaq Biotechnology Index is up around 15 per cent since the end of June. On Tuesday, the biotech index gained 1.4 per cent, lifted by news in the group. It remains down nearly 13 per cent in 2016.

Allergan said it agreed to acquire biopharmaceutical company Tobira Therapeutics at a significant premium to Tobira’s current share price. Shares of Tobira, which develops therapies for liver diseases, surged more than 700 per cent.

The US Food and Drug Administration also granted accelerated approval to Sarepta Therapeutics’ Duchenne muscular dystrophy drug, driving Sarepta shares up 14 per cent.

In other corporate news, shares of Royal Caribbean Cruises gained 4.5 per cent after the company raised its quarterly dividend late Tuesday.

US crude oil rose 0.3 per cent to $US43.44 a barrel, adding to Monday’s gains.

The Stoxx Europe 600 declined 0.1 per cent, following a quiet session in Asia.

Meanwhile, bond yields rose sharply in recent sessions in response to speculation around what the central banks will do, sparking volatility in stocks and currencies.

The dollar has fallen roughly 15 per cent against the yen so far this year, with the dollar recently little changed at Yen101.7210. Analysts said the bank would have to both announce surprising new easing measures and lift inflation expectations to materially weaken the Japanese currency.

The Bank of Japan’s balance sheet is now equivalent to roughly 90 per cent of Japan’s gross domestic product, compared with 35 per cent of the eurozone for the European Central Bank and 24 per cent of the US for the Federal Reserve, said Kully Samra, managing director at Charles Schwab.

With hundreds of billions of dollars in assets purchased annually and still no inflation, “I’ll be interested to see what rabbit they pull out of a hat,” he said of the BOJ’s meeting this week.

Dow Jones