Most European stocks drop as Fed awaited; Asia stocks, oil climb
European stocks retreated from an 18-month high while Asian equities headed for the longest winning streak in more than three years as investors awaited the outcome of a Federal Reserve policy meeting. The won and South Korean shares closed higher even as North Korea fired a rocket. Oil climbed.
The Stoxx Europe 600 Index dropped less than 0.1 percent as of 8:23 a.m. in London, with four stocks sliding for every three that advanced. The MSCI Asia Pacific (MXAP) Index added 0.5 percent, gaining for a 10th day. Standard & Poor’s 500 Index futures were little changed. Japan’s yen fell 0.4 percent versus the euro. South Korea’s won, which briefly dipped below Tuesday’s close, rose 0.2 percent against the dollar. Wheat in Chicago retreated 0.6 percent as Brent crude in London increased 0.3 percent.
The Fed will announce Wednesday $45 billion in monthly Treasury buying after a two-day meeting, a Bloomberg News survey of economists showed. Greece bought back enough bonds to meet a target necessary to obtain further aid from the International Monetary Fund and European Union, a government official said late Tuesday. North Korea launched a long-range rocket Wednesday in defiance of international sanctions.
“The U.S. economy is recovering, and the consensus is that the Fed will make a move to add more strength to it,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, which oversees about 15 trillion yen. “The rocket launch surprised me a bit because news reports said they were putting it off for now. It’s not a good thing at all, but it hasn’t appeared to scare the market much.”
Fed officials are considering whether to supplement $40 billion a month of mortgage-bond buying with purchases of Treasuries when their Operation Twist program expires at the end of the month. If expanded as expected, the new program will push the central bank’s balance sheet to almost $4 trillion.
U.S. stocks rallied Tuesday, with the Dow Jones Industrial Average erasing its decline since Election Day, as traders awaited progress on federal budget negotiations.
President Barack Obama is seeking a budget deal with Republican lawmakers to avert the so-called fiscal cliff, which would result in more than $600 billion of automatic tax increases and spending cuts next year. Obama reduced his demand for tax increases to $1.4 trillion from $1.6 trillion as he and House Speaker John Boehner traded another round of offers.
The yen dropped to 107.73 per euro. The won gained as much as 0.3 percent as a report showed unemployment held at a four- year low, before closing at 1,074.93 to the dollar.
North Korea confirmed it launched a rocket that put a satellite into orbit, showcasing the totalitarian regime’s progress in ballistic missile technology. Debris from the first stage fell into the Yellow Sea and the second stage dropped into the Philippine Sea. The launch came a week before the South’s presidential election.
Germany’s DAX Index (DAX) traded near the highest level since Jan. 14, 2008, as software maker SAP AG and Bayer AG, the country’s biggest drugmaker, advanced.
Japan’s machinery orders rose for the first time in three months, a sign that companies expect the world’s third-largest economy to return to growth in 2013.
The Nikkei 225 Stock Average gained 0.6 percent as the broader Topix Index climbed 0.7 percent. The Topix will rally 14 percent in the next six months as automakers lead gains amid a stronger global economy, said Kathy Matsui, the chief Japan strategist at Goldman Sachs Group Inc.
The Hang Seng Index rose 0.8 percent in Hong Kong, while a measure of Chinese companies listed in the city climbed 1.5 percent. Taiwan’s Taiex Index increased 1 percent. South Korea’s Kospi Index gained 0.6 percent.
Brent crude in London rose to $108.45 a barrel while oil in New York gained 0.3 percent to $86.08. Most members of the Organization of Petroleum Exporting Countries have signaled they’ll keep the output target unchanged as delegates gathered in Vienna to decide on the group’s production quota.
Wheat futures dropped to a five-month low of $8.1525 a bushel, following a 3.2 percent decline on Tuesday. A U.S. Department of Agriculture report showed global inventories will shrink less than forecast, easing concern that droughts from the U.S. to Australia were creating a grain shortage.
[Bloomberg]
