World stock markets rose with bank shares and short-dated United States bond yields hit multi-week peaks yesterday as investor focus turned to the Federal Reserve’s monetary policy meeting.
Technology shares also edged higher yesterday after a two-session sell-off that put the spotlight on various areas of the stock market where valuations appear stretched.
The Fed, the United States central bank, is widely expected to raise its benchmark interest rate today and may also provide details on its plans to shrink $4.5 trillion of assets it amassed to nurse the economic recovery.
Analysts say the Fed could take an aggressively hawkish posture of signalling a balance sheet reduction this year and another rate increase in December.
“Wednesday’s (today’s) meeting is pretty much a high-risk event for sure,” said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia in New York.
The Bank of Japan and the Bank of England also meet this week, although no major policy changes are expected here according to analysts.
The gap between benchmark United States and European bond yields held near its widest in a month as the Fed meeting also shone a light on the slow pace of change in European Central Bank policy.
The Canadian dollar hit a two-month high after Bank of Canada Governor Stephen Poloz said the central bank’s 2015 rate cuts “have largely done their work,” signalling that it could raise rates sooner than previously thought.
A US dollar index was down 0.1 per cent.
In the Treasury market, United States two-year yields touched 1.359 per cent, considered as their highest in a month, while three-year yields touched their highest since May 24 at 1.500 per cent ahead of three- and 10-year note auctions recorded on Monday.
Big technology names like Microsoft and Alphabet helped prop up US stocks.
The Dow Jones Industrial Average was up 54.03 points, or 0.25 per cent, to 21,289.7, the S&P 500 had gained 5.18 points, or 0.21 per cent, to 2,434.57 and the Nasdaq Composite had added 25.29 points, or 0.41 per cent, to 6,200.76.
The pan-European STOXX 600 was up 0.6 per cent.
Oil prices edged higher, reversing earlier losses.
Brent crude futures were up 0.3 per cent at $48.42 per barrel, while benchmark United States crude was up 0.1 per cent at $46.12.