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New York markets pre-open: Stocks mixed with Fed in focus; dollar strengthens

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New York markets pre-open: Stocks mixed with Fed in focus; dollar strengthens

SNL Image

? European stocks gain, despite sharp Asian losses.

? Investors await clues on Fed's future path.

? Dollar strengthens.

? ZTE plunges 41.56% upon trading resumption.

Global stock markets were mixed as investors awaited the results of the Federal Reserve's monetary policy meeting. The dollar strengthened against yen and sterling and U.S. Treasury yields were broadly stable, with futures pointing to the S&P 500 opening 0.2% higher.

European stock markets gained despite losses in Asia, ahead of an expected 25-basis-point hike in the Fed funds rate. Fed officials are expected to elaborate on how fast they are likely to tighten monetary policy.

The Euro Stoxx 50 rose 0.22% and the FTSE 100 added 0.51% before 7 a.m. ET. The Shanghai Composite earlier fell 0.97% and Hong Kong's Hang Seng index dropped 1.22%.

ZTE Corp.'s shares plunged 41.56% in Hong Kong after it resumed trading June 13 following a deal to lift a seven-year U.S. export ban that had left the company on the brink of collapse. Trading in ZTE shares was suspended in April. Chinese oil and gas companies PetroChina Co. Ltd. and CNOOC Ltd. were down 2.88% and 2.05%, respectively.

Separately, a U.S. district court judge on June 12 allowed AT&T Inc.'s proposed $85.4 billion purchase of Time Warner Inc. to proceed in a decision expected to lead to greater convergence in the media and communications sectors. Time Warner was trading 4.47% higher in premarket trading, while AT&T was down 2.97%.

Yields on 10-year Treasurys were little changed at 2.959% as of 7:00 a.m. ET.

"More important [than the hike] will be whether the dots will be moved higher, and to what extent the statement, and hence forward guidance will be altered to reflect the progress on inflation and unemployment," Société Générale said in a note to investors. "They will carry on hiking but without wanting to send a hawkish message to nervous currency markets."

"For the median forecast to move to four hikes this year (two in H2), only one member has to shift their vote. It is that close," according to Brown Brothers Harriman. "Failing to do so would be seen by some as a dovish hike, though the Fed funds futures strip does not show the market is convinced of an accelerated pace."

The yen slipped 0.17% against the dollar, while the euro gained 0.14% as of 7:01 a.m. ET. Sterling depreciated 0.33% as data showed U.K. annual inflation was lower than expected in May at 2.4%.

The dollar should be little affected by the Fed's announcement as a rate hike is widely expected, according to TD Securities. "If anything, we think the [dollar] is more inclined to trade with a weaker tone in line with our rates expectation and could be ultimately reliant on the ECB meeting for direction," TD Securities added.

The European Central Bank is set to begin discussing the end of its quantitative easing program at its meeting in Latvia on June 14.

Meanwhile, The Wall Street Journal reported that the Fed was considering holding a press conference after every meeting, rather than every other meeting.

The Turkish lira dived 1.20% ahead of June 24 elections while the South African rand gained 0.46% against the dollar and the Mexican peso was up 0.22%.

Ten-year yields on Italian sovereign debt fell by 10 basis points to 2.762%. German Bunds were stable.

Brent crude rose 0.24% to $76.06 per barrel on the ICE Futures Exchange as of 6:52 a.m. ET ahead of a petroleum status report by the U.S. Energy Information Administration. Gold was little changed at $1,298.20 per ounce.

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The day ahead:

8:30 a.m. ET — U.S. PPI (Econoday consensus: 0.3% monthly)

10 a.m. ET — Atlanta Fed business inflation expectations

10:30 a.m. ET — U.S. EIA petroleum status report

2 p.m. ET — FOMC announcement and forecast (Econoday consensus: 1.875% federal funds rate)

2:30 p.m. ET — Fed Chair press conference

10 p.m. ET — China fixed asset investment

10 p.m. ET — China industrial production (Econoday consensus: 6.8% yearly)

10 p.m. ET — China retail sales (Econoday consensus: 9.5% yearly)