Treasuries Signal Calm Before FOMC; Futures Steady: Markets Wrap

(Bloomberg) -- Treasuries climbed Tuesday while U.S. equity futures were little changed, with markets appearing unruffled ahead of a key Federal Reserve meeting.

Contracts on the S&P 500 index pared an early gain after the underlying gauge hit another record Monday. European equities were led higher by chemical firms, while Asian stocks were mixed. The 10-year Treasury yield pulled back under 1.5%, and the dollar was steady.

The day before the Fed’s next policy decision -- and possible hints about when the central bank will slow the pace of emergency asset purchases -- there were few nerves on display. The statement is set to include updated forecasts, and expectations are that officials would broadcast any taper plans well in advance.

“We think that market could remain relatively complacent in a low conviction environment ahead of the Fed meeting tomorrow,” according to Xavier Chapard, global macro strategist at Credit Agricole SA. “We continue to think that starting tomorrow the Fed could be slightly less ultra-dovish than it has been. While it will try not to trigger a significant market reaction, the question is whether it will succeed.”

Economists expect the so-called dot plot to point to an interest-rate increase in 2023, while the bank is unlikely to signal a scaling back of bond purchases until later this year.

Elsewhere, crude oil traded around $71 a barrel as investors weighed the outlook for rising demand against extended anti-virus curbs in some economies.

Bitcoin continued to gyrate amid a barrage of comments, briefly climbing above $41,000 only to pull back. The digital currency got a boost after veteran hedge fund manager Paul Tudor Jones re-endorsed the coin in a television interview.

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Here are some key events to watch this week:

• An EU-U.S. summit takes place in Brussels on Tuesday
• Data on U.S. industrial production, producer prices and retail sales come Tuesday
• The Federal Open Market Committee rate decision comes on Wednesday, with a news conference from Jerome Powell after
• U.S. President Joe Biden and Russia’s Vladimir Putin meet Wednesday in Geneva
• U.S. Treasury Secretary Janet Yellen testifies before a House panel Thursday on the federal budget
• Rate decisions come from Switzerland and Norway on Thursday
• The Bank of Japan’s monetary policy decision is on Friday

These are some of the main moves in markets:

Stocks

• Futures on the S&P 500 Index were little changed at 6:15 a.m. New York time.
• The Stoxx Europe 600 Index gained 0.1%.
• The MSCI Asia Pacific Index advanced 0.3%.
• The MSCI Emerging Market Index dipped 0.1%.

Currencies

• The Bloomberg Dollar Spot Index advanced 0.1%.
• The euro was little changed at $1.2126.
• The British pound sank 0.2% to $1.4083.
• The onshore yuan was little changed at 6.4 per dollar.
• The Japanese yen was little changed at 110.05 per dollar.

Bonds

• The yield on 10-year Treasuries sank one basis point to 1.48%.
• The yield on two-year Treasuries was unchanged at 0.16%.
• Germany’s 10-year yield dipped one basis point to -0.26%.
• Japan’s 10-year yield advanced one basis point to 0.051%.
• Britain’s 10-year yield fell one basis point to 0.731%.

Commodities

• West Texas Intermediate crude increased 0.6% to $71.31 a barrel.
• Brent crude advanced 0.6% to $73.31 a barrel.
• Gold weakened 0.1% to $1,864.99 an ounce.

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