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US stocks ticked higher ahead of the Federal Reserve’s policy meeting on Wednesday, at which the central bank is expected to raise interest rates by another quarter-point.
The blue-chip S&P 500 was up 0.5 per cent in Tuesday afternoon trading, nearing its highest level in more than a year, while the tech-heavy Nasdaq Composite rose 0.9 per cent. The moves also came as investors prepare for tech giants Microsoft and Alphabet to report their earnings after the closing bell, followed by Meta on Wednesday.
The Fed is expected to raise interest rates by 0.25 percentage points to bring the policy rate to a range of between 5.25 per cent and 5.5 per cent. Investors will be watching for signs of what the central bank will do next — whether this increase will be its last, or whether it is considering the possibility of raising again in September.
Treasury markets were slightly weaker, suggesting investors were holding off on taking big positions ahead of the Fed decision. The slight positive edge to stocks was likely attributable to a strong consumer confidence survey published on Wednesday morning, showing sentiment at two-year highs, said Eric Winograd, senior economist for fixed income at AllianceBernstein.
“I will be watching for whether chair [Jay] Powell indicates that the dot plot from June is still valid. I’ll also be watching to see if Powell indicates that September is a live meeting, which would be a hawkish signal,” Winograd said.
The European Central Bank and the Bank of Japan will set rates on Thursday and Friday, respectively.
Chinese stocks also rose on Tuesday, after Beijing vowed to extend further support measures to bolster the “tortuous” post-pandemic recovery of the world’s second-largest economy.
Mainland China’s CSI 300 rose 2.9 per cent, while Hong Kong’s Hang Seng index rose 4.1 per cent. There were also strong gains for the Hang Seng Mainland Properties index and the Hang Seng Tech index, which added more than 14 per cent and 6 per cent, respectively.
Among the biggest climbers in Hong Kong was Country Garden, China’s biggest developer by sales, which surged 18 per cent after falling 9 per cent on Monday amid a sell-off for the sector. In the tech sector, ecommerce platform JD.com rose almost 8 per cent.
“There’s a herd instinct here, and about two-thirds of this rally looks like short covering,” said Louis Tse, managing director of Hong Kong-based broker Wealthy Securities. “The politburo hasn’t talked about anything solid yet in policy terms, but if you had a short position before this you probably needed to cover today because everyone else is.”
Investors had closely watched Monday’s meeting of China’s powerful 24-member politburo for signs that Beijing would step in to revive the country’s economy, which rallied strongly at the beginning of this year after the unwinding of zero-Covid curbs but has since lost momentum.
The committee acknowledged the “tortuous progress” the economy had made and said it would work to tackle unemployment, speed up the issuance of special local government bonds and boost consumption of electronics, electric vehicles and other goods.
In Europe, the region-wide Stoxx 600 closed 0.5 per cent higher, lifted by basic materials stocks as investors took heart at the prospect of economic stimulus from Beijing. Germany’s Dax rose 0.1 per cent, while London’s FTSE 100 advanced 0.2 per cent.
