Fed fund futures are pricing 0% chance of a rate hike by Fed this week and this is the general consensus of the markets. Nonetheless, recent comments from Fed officials argue that Fed is still on track for two rate hike this year. Thus, a major focus this week will be any chance in the language in FOMC statement that hints on a June hike. Currently markets are pricing in only 23% chances of rate hike in June. But the pricing for at least one hike by September is 49% and 71% by December. That's quite significantly higher than prior month's pricing around 40% by September and 55% by December.
The Bank of Japan's (BOJ) two-day monetary policy meeting began today, 27 April 2016. Speculation is rife that the Japanese central bank will announce further easing of monetary policy. The BOJ in January decided to begin charging 0.1% interest on some bank reserves parked with the institution, in a bid to kick-start the economy and pull it out of two decades of deflation.
Crude oil prices hit 2016 highs after the World Bank on Tuesday raised its forecast for crude oil prices by about 11%, citing expectations for a reduction in the global supply glut. The crude oil rally was also underpinned by a weaker dollar, which fell on expectations that the U.S. Federal Reserve's Federal Open Market Committee (FOMC) will keep interest rates at existing levels.
The multi-lateral institution, which provides loans to developing countries, expects crude oil prices to average US$41 a barrel this year, compared with a previous forecast for US$37. The estimate for this year still marks a decline of 19% from last year. Oversupply in the global crude oil market is expected to recede, according to the quarterly Commodity Markets Outlook report.
On Tuesday, Brent and U.S. crude's West Texas Intermediate (WTI) futures finished regular trading about 3% higher. In post-settlement trade, both benchmarks rose more than 4%. Brent crude futures finished up $1.26 at $45.74 a barrel. In post-settlement trade, it rose as much as $2.01 to a 2016 high of $46.49. U.S. crude futures settled up $1.40 at $44.04. It gained $2.19 in after-hours trade to reach a year-to-date peak of $44.83.
Among Asian bourses
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Nikkei falls for third day
The Japan share market declined for third straight session, dragged down by yen appreciation against greenback and on caution ahead of policy decisions from the Federal Reserve and Bank of Japan. 21 out of 33 TSE industry sectors were down, with Land Transportation, Electric Appliances, Iron & Steel, Pharmaceutical, Air Transportation, and Real Estate stocks being major losers. The 225-issue Nikkei average declined 62.79 points, or 0.36%, to close at 17290.49. The Topix index of all first-section issues ended down 7.39 points, or 0.53%, at 1384.30.
Murata Manufacturing, Alps Electric and Nitto Denko, all Apple-related issues, met with selling after the U.S. company reported Tuesday the first decline in quarterly revenue in 13 years.
Canon tumbled 5.3% a day after the camera maker revised down its earnings estimates for the year through December, reflecting sluggish sales of laser printers and the higher yen.
On the other hand, IHI surged 4.33% on a news report that the heavy machinery maker plans to establish a new plant for the aircraft business for the first time in 20 years. Kawasaki Heavy recouped earlier losses and closed higher after announcing stronger-than-expected earnings for the fiscal year through March.
Australia Market falls 0.63%
Australian share market ended down after erasing early gains, due to surprisingly weak inflation data. The Consumer Price Index (CPI) fell 0.2% in the March quarter 2016, according to latest figures from the Australian Bureau of Statistics (ABS). This followed a rise of 0.4% in the December quarter 2015. Most industry sectors were down, with banks and financial and property trusts stocks being major losers. At close of trade, the benchmark S&P/ASX 200 declined 32.90 points, or 0.63%, to 5187.70. The broader All Ordinaries dropped 32.70 points, or 0.62%, to 5250.90.
The banks were hammered on concerns about a blowout in bad debts and views the banks' margins may come under pressure if they have to pass on any rate cut in full to blunt a political backlash. ANZ Banking Group declined 1.5% to A$23.88, National Australia Bank 2.2% to A$26.90, Westpac Banking Corp 2% to A$30.94, and Commonwealth Bank 2.5% to A$73.76.
Shares of materials and resources were also lower, with BHP Billiton down 0.6% to A$19.65, Rio Tinto down 2.1% to A$48.42 and Fortescue Metals down 2.9% to A$3.06.
China Market closes down
Mainland China stock market finished lower, on concerns about a government crackdown on speculation in commodities markets, with shares of consumer-discretionary and material companies led declines. The benchmark Shanghai Composite Index added 18 points, or 0.6%, to 2964.70. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, de-grew 13.24 points, or 0.42%, to 3165.92.
Consumer-discretionary and energy shares suffered the steepest losses among 10 industry groups. Hisense Electric Co. plunged 5.4%, while Shanxi Lu'an Environmental Energy Development Co. led declines for coal producers with a 5.2% drop.
Material shares extended losses after commodity exchanges intensified efforts to curb speculation in futures contracts. The nation's commodity exchanges stepped up efforts to curb speculation in trading in everything from steel to iron ore and coking coal after prices soared amid a credit-fueled binge. The Dalian Commodity Exchange will raise trading charges of coking coal and coke to 0.036% from 0.018% from April 27, according to a statement on the exchange's website. Jiangxi Copper Co. slid 1.3% after the Dalian exchange also said it will raise trading charges of iron ore contracts. Iron ore futures plunged 4.1%, extending their decline in the past four days to 8.9%. Steel reinforcement bar lost 3.2% and coking coal slid 4.6% as prices responded to the exchange moves.
Hong Kong Stocks drop 0.2%
The Hong Kong stock market declined for second straight session on Tuesday, 26 April 2016, amid increased nervousness in the markets over the policy outcome from the U.S. Federal Reserve, the Bank of Japan (BOJ) and the Reserve Bank of New Zealand this week. The benchmark Hang Seng Index dropped 45.67 points, or 0.21%, to 21361.60 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, grew 21.36 points, or 0.24%, to 9037.48 points. Turnover reduced to HK$54.9 billion from HK$62.8 billion on Tuesday.
StanChart (02888) soared 6% to HK$62.7. The lender announced its 1Q results, with pre-tax earnings falling 59% year-on-year, but it turned to black quarter-on-quarter. HSBC (00005) put on 0.8% to HK$52.65.
BOCHK (02388) slid 3% to HK$23.8 as its 1Q operating profit decreased 8% to HK$6.64 billion. BOC (03988) was unchanged at HK$3.2. It reported 1Q earnings grew 2% to RMB46.6 billion.
Nifty attains 25-week closing high
A divergent trend for various index constituents resulted in small gains for the two key benchmark indices. The barometer index, the S&P BSE Sensex, rose 56.82 points or 0.22% to settle at 26,064.12. The Nifty 50 index rose 17.25 points or 0.22% to settle at 7,979.90. The two key benchmark indices edged higher for the second day in a row.
Telecom major Bharti Airtel gained ahead of its Q4 results. IT stocks rose after global credit rating agency Moody's Investors Service said in a sector report that it expects the Indian IT services sector to maintain global market share gains despite headwinds. HCL Technologies dropped 1.58% ahead of its quarterly results. Shares of oil exploration and production companies rose as global crude oil prices surged.
Axis Bank edged lower after the bank's management said in a conference call that it expects bad loans to rise and credit costs to be sharply higher in the current financial year. Yes Bank edge higher in volatile trade after the private sector bank reported strong Q4 results.
Elsewhere in the Asia Pacific region: New Zealand's NZX50 was down 0.7% to 6750.40. South Korea's KOSPI index shed 0.2% to 2015.40. Taiwan's Taiex index sank 0.2% to 8563.05. Malaysia's KLCI shed 0.01% to 1692.34. Indonesia's Jakarta Composite index rose 0.7% to 4845.66. Singapore's Straits Times index eased 0.7% to 2874.72.
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