Wall Street edges higher; US Fed meeting in focus

Wall Street edges higher; US Fed meeting in focus

"The focus was on the Fed's thoughts on inflation and any implications for the pace of tightening outlined in the "dot plot".

The US Dollar index traded within a tight range on Tuesday ahead of tonight's Federal Reserve meeting, in which policymakers are expected to keep interest rates unchanged. It has also trimmed its inflation forecast. The previous quarter's growth rate was upwardly revised from 0.5% to 0.6%. Wells Fargo added 74 cents, or 1.4 percent, to $53.45.

The 30-year Treasury yield was trading at 2.780-a fall of ~0.99%.

"The Fed is continuing to confirm the narrative that the lack of inflation has been somewhat transitory and expect inflation to pick up", said Emily Roland, head of investment research at John Hancock Investments in Boston.

Asian markets turned lower Friday as investors cashed in at the end of a mostly positive week while the dollar weakened against its main peers with analysts questioning the chances of a third United States interest rate hike this year. That in turn may push bond prices higher.

Fed officials say they also foresee a slightly slower path for rate hikes in 2019.

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"If you model it out, over about the next three years they'll take out about $1.3trn or so". From next month the Fed will unwind its holdings of US Treasurys and mortgage-backed securities at an initial rate of $10 billion a month to a maximum of $50 billion a month. It is also expected to announce how the presumably very gradual unwinding of its vast, $4.5 trillion balance sheet will be structured in the months and years ahead. Allstate gained 55 cents, or 0.6 percent, to $91.03. The bond-market selloff that pushed intermediate and long-term Treasury yields up from 2017 lows reached September 8 is on the brink of making five-year notes a buy, according to technical analysis by Aaron Kohli at BMO Capital Markets.

Fed officials cautioned that the devastation of Hurricanes Harvey, Irma and Maria would hold back the USA economy in the "near term".

CHINA RATING: Markets in Asia were getting their first chance to react to Standard & Poor's announcement late Thursday that it was downgrading China's credit rating, citing rising debt levels. Johnson Controls rose 3 percent and American Airlines rose 2.3 percent. The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was last up 0.2% after its biggest gain in a week on Wednesday.

The Dow Jones Industrial Average .DJI rose 41.79 points, or 0.19 percent to end at 22,412.59, its seventh straight record close.

Asian stocks slipped on Friday but showed signs of steadying as the dust began to settle after the Federal Reserve's hawkish policy statement, while investors looked to see how Chinese financial markets would react to a downgrade on the nation's credit rating.

The gold price and interest rates / bond yields usually move in the opposite direction as gold produces no income and investors have to rely on price appreciation to book returns. It is conceivable, however, that in the near future, the Fed could be forced to cram more rate hikes in a shorter time frame-something it wants to avoid.