Markets muted as investors await details of US stimulus

AP and AFP

MANILA/HONG KONG–Global stock markets were muted Tuesday as investors waited for a U.S. Federal Reserve policy meeting this week for clues about when the central bank will begin reducing its monetary stimulus.

Gains in the world’s stock markets have been underwritten for several years by the Fed’s mammoth expansion of the U.S. money supply. But as the world’s biggest economy slowly recovers from the 2009 recession, the Fed is expected to start scaling down its purchases of government bonds and mortgage securities that total US$85 billion a month.

Markets had previously expected the withdrawal of stimulus to begin this year but expectations have shifted to next year as the pace of improvement in the U.S. economy waned. A weak set of data — including soft jobs growth — and this month’s two-week government shutdown has made that highly unlikely. The wording of the Fed’s statement this week will be scrutinized for any new indications about when that process will begin. Any hints of change could roil markets.

“Nothing news-breaking out of the Fed is really expected, but overseas players are reticent to trade, nonetheless, before the central bank speaks and also before the earnings season peak on Wednesday-Thursday,” an equity trading director at a foreign brokerage in Japan told Dow Jones Newswires. The likelihood of the wind-down being put off increased on Monday, with disappointing U.S. pending home sales numbers. In early European trading, Britain’s FTSE 100 was 0.5 percent higher at 6,756.24. Germany’s DAX was up 0.2 percent at 8,996.28 and France’s CAC-40 added 0.1 percent to 4,257.61.

Futures in New York pointed to a flat open on Wall Street, with Dow Jones and S&P 500 futures little changed.

In Asia, markets were mixed on Tuesday, with Wall Street providing a soft lead, as traders await a U.S. Federal Reserve policy meeting for clues about its plans for its stimulus program.