LONDON: Wall Street stocks pushed further into record territory Tuesday as the Federal Reserve begins a crucial meeting set to reveal the start date for tapering of its vast cash stimulus that has supported the world’s biggest economy through the pandemic.
After all three main Wall Street indices finished Monday at record closing levels, they pushed higher at the opening bell Tuesday, with both the S&P 500 and Nasdaq Composite setting new all-time records.
In Europe, London’s benchmark FTSE 100 index lost 0.4 percent in afternoon trading with heavyweight energy group BP hit by mixed quarterly earnings.
In the eurozone, Frankfurt rose 0.9 percent and Paris won 0.3 percent.
Asian stock markets fell as investors remain on edge about the outlook with Hong Kong and Shanghai weighed down by the latest Covid outbreak in China that led authorities to reimpose strict containment measures.
Following a two-day gathering, the US Federal Reserve is Wednesday expected to announce plans to begin tapering its huge stimulus programme as the economy recovers.
A day later, the Bank of England is seen likely to raise its key interest rate for the first time in more than three years as inflation soars.
– ‘Sea change’ in policy –
“Attention has shifted towards central banks, as we gear up for a tapering announcement from the Fed and a possible rate hike from the BoE,” said IG analyst Chris Beauchamp.
“This does mark quite the sea change from the dominant policy backdrop of the last 18 months, but of course is a signal that things are moving on from the emergency phase as growth recovers and inflation picks up.”
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 Tuesday, 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.
But the Fed’s Wednesday gathering is the main focus of attention.
US authorities are forecast to start tapering their bond-buying programme this month.
The Fed’s inflation outlook and timeline on raising borrowing costs will likely top the agenda.
– Inflation ‘elephant in room’ –
The main focus of the meeting “will be much more on the Fed’s inflation stance than tapering”, said Standard Chartered Bank analyst Steve Englander.
“The elephant in the room is headline and underlying inflation, which are higher than the (Fed policy board) was anticipating.”
Wall Street enjoyed another record close on Monday, 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.
Pfizer again lifted its 2021 profit and revenue outlook on Tuesday, bolstered by the latest surge in Covid-19 vaccinations, including regulatory approvals for boosters and shots for younger populations.
Its shares rose 3 percent as trading got underway.
– Key figures around 1430 GMT –
London – FTSE 100: DOWN 0.4 percent at 7,258.38 points
Frankfurt – DAX: UP 0.9 percent at 15,940.09
Paris – CAC 40: UP 0.3 percent at 6,911.64
EURO STOXX 50: UP 0.2 percent at 4,288.32
New York – Dow: UP less than 0.1 percent at 35,935.25
Tokyo – Nikkei 225: DOWN 0.4 percent at 29,520.90 (close)
Hong Kong – Hang Seng Index: DOWN 0.2 percent at 25,099.67 (close)
Shanghai – Composite: DOWN 1.1 percent at 3,505.63 (close)
Euro/dollar: DOWN at $1.1585 from $1.1606 at 2100 GMT Monday
Dollar/yen: DOWN at 113.82 from 114.00 yen
Pound/dollar: DOWN at $1.3626 from $1.3665
Euro/pound: UP at 85.04 pence from 84.93 pence
Brent North Sea crude: DOWN 0.6 percent at $84.17 per barrel
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