Fed jitters to weigh on local shares
Local investors are nervous before the US Federal Reserve’s policy board meeting on Wednesday, amid speculation the Fed will soon wind back its third round of bond purchases, known as quantitative easing, or QE3.
Locally, the ASX 200 futures market is pointing to a fall of 26 points when the market opens.
AMP Capital chief economist Shane Oliver said the market will remain volatile until the results of the Fed’s meeting are released.
‘‘There’s still quite a bit of nervousness going into the Fed’s meeting on Wednesday as to what will be the signal regarding tapering quantitative easing and interest rates and that’s probably going to cause volatility in the week ahead,’’ Dr Oliver said.
After recent falls on the local market, investors were taking a renewed interest in higher-yielding banking stocks and telcos, he said.
‘‘Overall, I think the Fed’s message is going to be taken positively by markets but there will be some nervousness in the lead-up to it.’’
It comes after US stocks gave up an early rally and ended lower on Friday due to investor caution.
Minutes of the Reserve Bank’s June board meeting will be released on Tuesday while the Westpac-Melbourne Institute leading indexes of economic activity will be released on Wednesday.
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The article says the Australian sharemarket is expected to open in negative territory on Monday, with ASX 200 futures pointing to a fall of around 26 points despite a late surge at the end of last week.
Local investors are nervous because the US Federal Reserve meeting on Wednesday could signal that it will begin winding back its third round of bond purchases (QE3) or give clues on interest rates — uncertainty that often drives market volatility.
According to AMP Capital chief economist Shane Oliver, markets are likely to remain volatile until the Fed’s meeting results are released because any signals about tapering quantitative easing or future interest‑rate moves can prompt short‑term investor nervousness.
After recent falls on the local market, investors were taking a renewed interest in higher‑yielding banking stocks and telecommunications (telco) shares, as noted in the article.
US stocks gave up an early rally and ended lower on Friday due to investor caution, which contributed to the cautious mood among Australian investors and the expectation of a softer local open.
Two domestic releases to watch are the Reserve Bank of Australia’s June board minutes (due Tuesday) and the Westpac‑Melbourne Institute leading indexes of economic activity (due Wednesday), both of which could influence market sentiment.
Traders use ASX 200 futures as an indicator of how the market is likely to open; in this case futures were pointing to a drop of about 26 points, suggesting a softer start for the Australian sharemarket.
AMP Capital chief economist Shane Oliver provided the commentary, saying the market will probably be volatile in the lead‑up to the Fed meeting and that while the Fed’s message could be taken positively overall, there will still be nervousness beforehand.
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