Overnight roundup courtesy of Spreadex – 17/09/13

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Asian stocks have declined overnight as investors gear up for today’s Federal Reserve policy meeting. The 2-day event is certain to install some trepidation in investors with the majority of economists surveyed of the belief that Fed policymakers will cut monthly bond buying by $10 billion to $75 billion per month. Global stocks surged to a five-year high yesterday after Lawrence Summers withdrew as a candidate for the position of Fed chairman. 

Summers, a former Treasury secretary, would have tightened central bank policy more than Fed Vice Chairman Janet Yellen. With the more dovish Yellen, we can expect to see less volatility than what economists expected with the appointment of Summers. Consequently, the dollar sunk near a four-week low.

However, many analysts point out that (interest) rate hike expectations are of fundamental importance because of their impact on short-term U.S. bond yields and thereby the dollar’s yield attraction. A faster pace of rate increases would make the dollar more attractive given that many other central banks, such as the European Central Bank and the Bank of Japan, are perceived to be nowhere near tightening. 

In another boost for the U.S economy, A U.S. government report today is expected to show the annual increase in the cost of living slowed in August. Meanwhile, the price of oil has slid for a third day as the threat of military action against the Assad regime recedes. 

The U.K government has laid out plans to sell a £3.3 billion stake in Lloyds Banking Group to investors within a 75p-76p price range. in what is a first step toward full private ownership of Britain’s largest mortgage lender, the bank plans on selling some 6 percent of the company. George Osborne also made clear that RBS which received a 45.5 billion-pound bailout, is still burdened by too many poor assets to be sold. Shares in Lloyds have climbed 61 percent this year.

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