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You can find the current article at its original source at https://www.theguardian.com/business/live/2017/sep/20/us-federal-reserve-decision-janet-yellen-markets-uk-retail-business-live
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| Markets at new record highs ahead of US Federal Reserve decision – business live | Markets at new record highs ahead of US Federal Reserve decision – business live |
| (35 minutes later) | |
| 8.55am BST | |
| 08:55 | |
| Peter Rosenstreich of Swissquote Bank fears that markets could react badly if the Federal Reserve announces that it will start unwinding its stimulus programme, and cut the size of its balance sheet. | |
| He argues that investors are simply too relaxed, given the risks of geopolitical instability around the globe: | |
| The big news event on 20 September will be the report of the US Federal Reserve’s Open Market Committee – we believe the central bank will finally announce plans to start selling its massive holding of bonds. This is likely to begin in October. Meanwhile, the Fed is unlikely to move interest rates. | |
| What does this mean for the US dollar? Possibly a shock. Markets are calm – too calm, really, like those western films where the sheriff rides into an empty town. Despite the tensions in North Korea and the Middle East, despite a see-sawing US president, despite implied volatility, willingness to take risks is historically unprecedented, which we know could end in tears. Markets continue to rationalize this, by seeing low inflation, solid growth and gradual central bank normalization. We’re not so sure. A balance-sheet unloading could end the ‘feel good’ environment, sending both bond and stock markets southward. | |
| 8.37am BST | |
| 08:37 | |
| Asian markets remained calm today, despite Donald Trump’s threat to ‘totally destroy’ North Korea. | |
| The South Korean won strengthened a little, shrugging off Trump’s remarkable attack on ‘rocket man’ Kim Jong Un. | |
| Today's front page 👇 - Trump, Boris, Gaga... pic.twitter.com/4jOgWV2sw8 | |
| European markets have also opened softly too, with the FTSE 100 gaining 9 points to 7283, and Germany’s DAX pretty flat. | |
| Connor Campbell of SpreadEx says: | |
| Despite myriad different macro-events fighting for attention – including a deadly earthquake in Mexico, the latest hurricane devastation in the Caribbean, Donald Trump’s sabre-rattling speech at the UN and Boris Johnson’s Brexit boasting – the markets are only interested in one thing this Wednesday: September’s Federal Reserve meeting. | |
| 8.14am BST | 8.14am BST |
| 08:14 | 08:14 |
| World markets at new peaks | World markets at new peaks |
| World stock markets are at record highs as investors await tonight’s Federal Reserve decision. | World stock markets are at record highs as investors await tonight’s Federal Reserve decision. |
| The MSCI All Country World Index has nudged up to 487.66, up from 487.37 yesterday. | The MSCI All Country World Index has nudged up to 487.66, up from 487.37 yesterday. |
| That extends its recent run of record highs, as markets begin the autumn in good spirits. | That extends its recent run of record highs, as markets begin the autumn in good spirits. |
| That follows another solid day’s trading on Wall Street, where the Dow Jones and the S&P both hit record highs. | That follows another solid day’s trading on Wall Street, where the Dow Jones and the S&P both hit record highs. |
| Mike van Dulken of Accendo Markets says: | Mike van Dulken of Accendo Markets says: |
| Investors are buckling up for another Fed policy update which may contain news and/or hints about the timing of further policy tightening by way of balance sheet unwinding and the next rate hike. | Investors are buckling up for another Fed policy update which may contain news and/or hints about the timing of further policy tightening by way of balance sheet unwinding and the next rate hike. |
| 7.59am BST | 7.59am BST |
| 07:59 | 07:59 |
| The agenda: All eyes on the Federal Reserve | The agenda: All eyes on the Federal Reserve |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| Investors around the globe have one thing at the top of their agenda today - the Federal Reserve. America’s top central bankers are meeting today to set monetary policy, and it could be a red letter day in the recovery from the financial crisis. | Investors around the globe have one thing at the top of their agenda today - the Federal Reserve. America’s top central bankers are meeting today to set monetary policy, and it could be a red letter day in the recovery from the financial crisis. |
| The Fed is expected to take the historic move to start unwinding its massive stimulus programme, concluding that the US economy is strong enough to cope without a helping hand. | The Fed is expected to take the historic move to start unwinding its massive stimulus programme, concluding that the US economy is strong enough to cope without a helping hand. |
| “Massive” isn’t an understatement. After the crisis began in 2008, the Fed bought tens of billions of dollars of government bonds each month, swelling its balance sheet to a mighty $4.5 trillion. It now has to decide how to unwind this money-printing programme without spooking the financial markets. | “Massive” isn’t an understatement. After the crisis began in 2008, the Fed bought tens of billions of dollars of government bonds each month, swelling its balance sheet to a mighty $4.5 trillion. It now has to decide how to unwind this money-printing programme without spooking the financial markets. |
| The Fed is likely to tread carefully; it’s not expected to raise interest rates today, for example. | The Fed is likely to tread carefully; it’s not expected to raise interest rates today, for example. |
| Policymakers will also indicate whether they expect borrowing costs to rise this year, and where they expect rates to peak in a few years, by using the Fed’s famous Dot Plot. | Policymakers will also indicate whether they expect borrowing costs to rise this year, and where they expect rates to peak in a few years, by using the Fed’s famous Dot Plot. |
| Here’s the old dot plot (each blob shows where one Fed committee member expects rates to be each year). | Here’s the old dot plot (each blob shows where one Fed committee member expects rates to be each year). |
| (Fed dot plot) FOMC members estimate a 3% interest rate in the long run, chart @FT https://t.co/4B6OV7J3s1 pic.twitter.com/O172AaKCcC | (Fed dot plot) FOMC members estimate a 3% interest rate in the long run, chart @FT https://t.co/4B6OV7J3s1 pic.twitter.com/O172AaKCcC |
| Today’s arrangement of dots will be closely scrutinised, says Naeem Aslam of Think Markets: | Today’s arrangement of dots will be closely scrutinised, says Naeem Aslam of Think Markets: |
| The element that investors are going to pay a lot of attention is the update on the dot plot. We expect the Fed to show more softer approach to the future interest rate hike. | The element that investors are going to pay a lot of attention is the update on the dot plot. We expect the Fed to show more softer approach to the future interest rate hike. |
| According to their last projection, the Fed expected seven rate hikes by the end of 2019. However, in the new forecast, the market is widely expecting them to drop one interest rate hike. | According to their last projection, the Fed expected seven rate hikes by the end of 2019. However, in the new forecast, the market is widely expecting them to drop one interest rate hike. |
| The immediate question is whether the Fed still expects to make one more interest rise this year (assuming they don’t hike tonight). | The immediate question is whether the Fed still expects to make one more interest rise this year (assuming they don’t hike tonight). |
| The Fed will also release new economic forecasts, and could also talk about the impact which the hurricane season will have on US growth. | The Fed will also release new economic forecasts, and could also talk about the impact which the hurricane season will have on US growth. |
| The markets aren’t really sure what to expect, so we’re looking at a cautious day’s trading until the Fed announcement comes at 7pm UK time, or 2pm in New York. | The markets aren’t really sure what to expect, so we’re looking at a cautious day’s trading until the Fed announcement comes at 7pm UK time, or 2pm in New York. |
| European opening call @LCGTrading $FTSE +3 points at 7278$DAX -8 points at 12553$CAC -6 points at 5231#EuroStoxx -7 points at 3524 | European opening call @LCGTrading $FTSE +3 points at 7278$DAX -8 points at 12553$CAC -6 points at 5231#EuroStoxx -7 points at 3524 |
| The agenda: | The agenda: |
| 9.30am BST: UK retail sales for August. They’re expected to be flat month-on-month, having risen 0.5% in July. | 9.30am BST: UK retail sales for August. They’re expected to be flat month-on-month, having risen 0.5% in July. |
| 10am BST: OECD publishes its latest global economic outlook. Will it repeat its warning of a Brexit slowdown in 2018? | 10am BST: OECD publishes its latest global economic outlook. Will it repeat its warning of a Brexit slowdown in 2018? |
| 7pm BST: Federal Reserve decision released. | 7pm BST: Federal Reserve decision released. |
| 7.30 BST: Fed chair Janet Yellen’s press conference | 7.30 BST: Fed chair Janet Yellen’s press conference |