It's Fed decision day, North Korea claims summit victory, and more signs of euro-area slowdown.
Decision day
The Federal Open Market Committee is almost certain to announce a quarter-point raise in interest rates when it publishes its decision at 2:00 p.m. Eastern Time today. If that happens, investor focus will turn to the dot-plot, which may show a median estimate of four hikes this year, up from three previously. The announcement will be followed at 2:30 p.m. by Chair Jerome Powell’s second press conference since he took the helm at the world’s most important central bank.
Dust settling
North Korean state media reported that leader Kim Jong Un said that President Donald Trump offered to lift sanctions against the country when the two met in Singapore. As the dust settles following yesterday’s summit, skepticism is building over what was achieved as the next agreed steps in the denuclearization drive remain unclear. As Trump arrives back in the U.S. this morning, attention will return to domestic issues as he faces increasing pressure to sit down for an interview with Special Counsel Robert Mueller.
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European data
Euro-area industrial production fell more than expected in April, dropping 0.9 percent, with underwhelming economic data becoming the norm in the common-currency area ahead of tomorrow’s European Central Bank decision. The meeting, after which the ECB may or may not announce an end date for QE, will also be accompanied by its latest projections for the region’s economy. A Bloomberg survey showed that political and trade worries remain the biggest concerns for economists.
Markets waiting
Overnight, the MSCI Asia Pacific Index fell 0.4 percent while Japan’s Topix index closed 0.4 percent higher as the yen weakened ahead of the Fed decision. In Europe, the Stoxx 600 Index was 0.2 percent higher at 5:40 a.m. with stocks mostly range-bound as investors awaited monetary updates. S&P 500 futures pointed to a quiet open, the 10-year Treasury yield was at 2.957 percent and gold was lower.
Oil update
The International Energy Agency said that OPEC members Iran and Venezuela could lose almost 30 percent of their oil output next year due to U.S. sanctions and economic upheaval, in its first detailed forecast for 2019. The report this morning will increase pressure on a meeting of OPEC and its allies next week to permit increases in output. The recent rally in crude prices helped by production cuts saw the end of the oil market’s contango structure. That shift has hit trading houses hard, with Trafigura Group reporting a 53 percent drop in first-half profits.