Bloomberg
“U.S. Stocks Mixed, Dollar Weakens Before Rate Call: Markets Wrap”
U.S. stocks remained listless, the dollar slipped and Treasuries edged higher as investors count down to the Federal Reserve’s rate decision and press conference. Commodities advanced as oil rose alongside industrial metals.
The S&P 500 Index churned near all-time highs, stuck in one of the tightest trading ranges in history as attention turned to expected commentary on reducing the Fed’s balance sheet. Bloomberg’s dollar index fell a second day and 10-year Treasury yields fell to 2.23 percent. The Mexican peso slipped after a 7.2 magnitude earthquake struck. U.S. crude held at $50 a barrel.
Financial markets largely remain calm — even after President Donald Trump used a UN speech to threaten to annihilate North Korea — as all eyes turn to Wednesday’s Fed decision. Expectations are high that the central bank of the world’s biggest economy will unveil plans to start shrinking its $4.5 trillion balance sheet, while any clues on the chances of a rate increase this year could tip the balance — market expectations of another hike in 2017 are at about 50 percent.
Elsewhere, Spanish assets showed resilience even as the government cracked down on an illegal separatist referendum planned in its largest economic region. the New Zealand dollar jumped after a poll put the ruling National Party back in the lead ahead of the main opposition Labour Party ahead of this weekend’s election. And the fixing of the yuan remained in focus as investors try to gauge where the People’s Bank of China wants the currency. Read more about the importance of the fixings here.
New York Times
“Hurricane Maria Live Updates: Puerto Rico Suffers a Direct Hit With Worries of Floods”
Hurricane Maria made landfall on Puerto Rico as a powerful Category 4 storm early Wednesday, cutting electricity and phone lines, sending thousands of people into shelters and raising the prospect of deadly floods. The storm was bringing new misery to a region that has seen two other powerful hurricanes, Irma and Jose, in recent weeks.
As of 11 a.m., Maria’s core was moving over Puerto Rico with 140 m.p.h. winds, the National Hurricane Center said. The storm was expected to produce “life-threatening flooding,” with 12 to 18 inches of rain falling in Puerto Rico through Friday and an additional five to 10 inches of rain in the Virgin islands.As the hurricane moved in, residents across Puerto Rico were awakened by the clamor of strengthening wind gusts.
“For Irma, we were very prepared,” Gov. Ricardo Rosselló said on CNN on Wednesday morning. “Unfortunately, of course, now we’re feeling a second storm in two weeks, and this one much more devastating than the first one. Who knows what the damage will be?”. Flooding and mudslides are major concerns, he warned, and the rain that follows the brunt of the storm could be just as dangerous as the winds.
BBC News
“Spain’s Guardia Civil police have detained 14 Catalan officials and raided regional government ministries involved in organising a banned independence vote.”
Tensions were already high before Josep Maria Jové, number two in the Catalan vice-presidency, and others were held. Thousands of Catalans took to the streets in protest and the regional leader complained of a power grab. Spanish Prime Minister Mariano Rajoy said the state had been forced to act. Catalonia’s separatist government is defying a Constitutional Court order to halt the planned 1 October vote, which has been condemned by the Madrid government as illegal.
Wednesday’s operation targeting over 20 ministries and institutions was a dramatic intensification of Spain’s attempt to stop the vote taking place. At least six million ballot papers were found in a warehouse outside Barcelona, reports said.
And in a separate move Spain’s finance minister, Cristóbal Montoro, said the national government was now set to take control of a large part of Catalonia’s public finances.
After an emergency cabinet meeting Catalan President Carles Puigdemont accused the Madrid government of «de facto» suspending the region’s autonomy and imposing a state of emergency.
Reuters
“Fed conflicted by weak U.S. inflation, global economic rebound”
Caught between a lull in U.S. inflation and a stronger global economy, the Federal Reserve is expected on Wednesday to signal whether it will raise interest rates for a third time this year or back off until prices rise more briskly.
The U.S. central bank’s description of inflation in its policy statement as well as fresh economic forecasts from individual policymakers will be the main focus for financial markets amid a recent spate of lukewarm domestic data.
The Fed also is likely to announce a scheduled reduction of its approximately $4.2 trillion in holdings of bonds and mortgage-backed securities, most of it accumulated in response to the 2007-2009 financial crisis and recession. That plan, anticipated by markets and not expected to have much immediate impact, will limit the amount of maturing bonds used each month to purchase new ones. The initial cut in reinvestment will be $10 billion per month, probably beginning in October.
Analysts and investors, however, say they will look more intently at policymakers’ forecasts for the end-of-year federal funds rate as an indication of whether a quarter-point increase widely expected in December is likely to occur.