Markets decline as investors are cautious ahead of Federal Reserve decision - 15.9.2015

US stocks declined on Monday as investors were cautious to add to their equity holdings ahead of Federal Reserve’s policy meeting this week. The ICE dollar index, a measure of dollar’s strength against a basket of six major rivals, was flat. S&P 500 fell 0.4%, with nine of its ten main sectors finishing in negative territory led by materials and energy stocks. The Federal Open Market Committee starts a two-day meeting on Wednesday and will decide whether to increase the interest rate for the first time since 2006. Expectations for rate increase on Thursday are not high with the fed funds futures market pricing in 23% chance of rate hike. Alibaba Group Holding Ltd. fell 3.1% after a Barron’s magazine article suggested Alibaba may fall 50%. Yahoo Inc. ,which owns a stake in Alibaba, fell 3.5%. Apple Inc. gained 1% following an upbeat estimate by Barron’s that the tech giant’s shares may jump 50% on its new iPhone program. Today at 13:30 CET August advance retail sales will be released in US. The tentative outlook is negative for the dollar. At 14:15 CET August industrial production will be released. And at 15:00 CET August business inventories will come out. The tentative outlook is positive.

European stocks slipped on Monday as traders were reluctant to buy stocks ahead of Federal Reserve’s interest rate decision this week. The euro weakened 0.3% against the US dollar. The Stoxx Europe 600 closed down 0.6% , after climbing 0.9% initially as euro-zone data showed industrial production rose better than expected 0.6% in July on a month-over-month basis. Germany’s DAX 30 edged higher 0.1%, helped by weaker euro. Today at 10:00 CET September ZEW survey results for Germany and euro-zone will come out. The tentative outlook is negative for euro.

Nikkei rose 0.3% today as Bank of Japan kept the monetary stimulus program at the 80 trillion yen ($666 billion) annual level after two-day policy meeting. The yen gained against the dollar after the decision. Tomorrow at 06:00 CET Bank of Japan monthly economic report for September will be released. At 07:00 CET machine tool orders will be published. The tentative outlook is negative.

Chinese shares extended losses today after data showed on Sunday that China’s factory output and fixed-asset investment were both weaker than expected in August. The Shanghai Composite Index lost 3.6 %. It should be noted, that stocks fell about 12% in August.

Brent futures prices are falling today on concerns slower growth of Asian economies will result in lower demand for crude oil. Prices settled at more than 2 week low on Monday after data overnight showed weaker-than-expected industrial production in China. Oil prices found some support recently on hopes global output has started to decline as evidenced by Baker Hughes report Friday that the number of active US oil-drilling rigs fell by 10 to 652 rigs last week, the second consecutive week of declines. And in a monthly report on Monday OPEC cut its oil supply outlook from nonmember countries this year by about 72,000 barrels a day to 880,000 barrels a day citing lower-than-expected shale-oil output in the US. The global markets are still oversupplied, and Goldman Sachs said last week that US oil prices could fall as low as $20 a barrel to clear out a global supply glut.