Subscribe

Fed expected to hold on mid-2015 rate hike, despite doubts (+video)

The Federal Reserve starts its much-anticipated two-day meeting on Tuesday. Experts expect the Fed to acknowledge the uncertain global outlook and stick to its promise to be patient on tightening, but continue to signal a lift-off in interest rates in mid-2015. 

  • close
    Federal Reserve Chair Janet Yellen speaks with reporters at the Federal Reserve in Washington. The Fed begins its two-day meeting Tuesday, Jan. 27, 2014, and is widely expected to hew to its signaling of rising interest rates in the middle of this year
    Cliff Owen/AP/File
    View Caption
  • About video ads
    View Caption
of

The euro rose and shares slipped in Europe on Tuesday as mixed corporate earnings and concerns over Greece kept investors cautious ahead of a busy week which will include the first policy meeting of the U.S. Federal Reserve this year.

Russian markets were also jittery after a cut to the country's sovereign credit rating.

Investors will be keen to hear the Fed's response to the recent policy easing by global central banks such as the European Central Bank, whose long-awaited plan to buy bonds to revive the flagging euro-zone economy has propelled bond yields and the euro to multi-year lows and stocks to multi-year highs.

Recommended: Janet Yellen: Five economic policy views

Although core bond yields held near those lows, lower-rated yields edged higher after Europe signaled it would not yield to a new Greek government's demands for debt forgiveness, though it showed a willingness to give Athensmore time to pay its debts. Top Greek shares were down 2.7 percent.

Credit markets were also jittery beyond the eurozone, with the cost of insuring exposure to Russia's debt up after Standard & Poor's cut Russia's sovereign credit rating to "junk" late on Monday, citing weakened economic growth prospects and Western sanctions.

"A lot of investors have been taken aback by the speed of macroeconomic adjustments," said Sean Darby, global equity strategist at Jefferies. "This is not the type of environment they like to invest in."

The pan-European FTSEurofirst 300 equity index was down 0.2 percent. European heavyweights Philips and Siemens were among those reporting disappointing earnings or outlook statements, while in the U.S. Microsoft Corp reported a fall in quarterly profit.

"Today's earnings show that global demand remains the big issue. Companies can take advantage of low rates, they can buy back stock but they cannot create demand and they will get hurt by global currency wars," said Lex Van Dam, hedge-fund manager at Hampstead Capital.

Most Asian share markets firmed on Tuesday. The euro clung to rare gains, up 0.9 percent to trade at $1.13455, taking it further from an 11-year trough of $1.1098 hit on Monday.

Investors widely expect the Fed to acknowledge the uncertain global outlook and stick to its promise to be patient on tightening. Yet its timetable remains for lift-off on rates by mid-year, a trajectory that presages further broad-based gains for the dollar.

Japan's Nikkei gained 1.4 percent, while Australia's main index added 0.8 percent. Other moves were mostly modest and MSCI's broadest index of Asia-Pacific shares outside Japan was flat on the day.

Chinese markets continued their recent erratic path and the Shanghai index slipped 2.2 percent.

On Wall Street, the Dow had ended Monday up a bare 0.03 percent, while the S&P 500 gained 0.26 percent and the Nasdaq 0.29 percent.

A snow storm engulfing New York is expected to keep many investment banks and fund managers on skeleton staff, though the main exchanges all plan to open as usual on Tuesday.

In commodity markets, U.S. crude was quoted 17 cents lower at $44.97. Brent fell 21 cents to $47.95. (Reporting by Lionel Laurent; Additional reporting by John Geddie, Francesco Canepa, Jemima Kelly, Karin Strohecker; Editing by Gareth Jones)

About these ads
Sponsored Content by LockerDome
 
 
Make a Difference
Inspired? Here are some ways to make a difference on this issue.
FREE Newsletters
Get the Monitor stories you care about delivered to your inbox.
 

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK