US Treasuries trade cautiously ahead of FOMC policy meeting

Reuters

Nasdaq 100 e-minis were down 2 points, or 0.04 percent, on volume of 4,552 contracts. Five stocks rose for every three that fell on the New York Stock Exchange.

The price of oil has been slipping on concerns that supplies will outweigh demand. Benchmark Brent crude settled down 0.8 percent at $50.92 a barrel.

It's the seventh straight decline in the price of oil.

Most Fed policymakers say such data gives them increasing confidence that inflation will eventually reach the Fed's goal after years of undershooting.

Fed policymakers have a 2 percent inflation target and track a measure that is now at 1.7 percent. The two-year yield slipped to 1.36% from 1.38%, and the 30-year yield sank to 3.17% from 3.21%. Stocks of smaller companies also took big hits.

The Standard & Poor's 500 index was virtually flat at 2,372, as of noon Eastern time.

A rate rise at the end of the Federal Reserve's two-day policy meeting on Wednesday is all but a foregone conclusion on Wall Street - now traders want to know whether the central bank sees more than a total of three increases this year.

An increase today would be only the third since 2008, and if the Fed signals it might attempt four increases this year, that would probably "rattle" financial markets, said Ryan Sweet, director of real-time economics at Moody's Analytics.

Current Fed Chairwoman Janet Yellen said late last month at a speech to the Executives' Club of Chicago that, assuming employment and inflation evolve in line with the Fed's expectations, she believed raising the Federal Funds rate was appropriate.




A Fed interest rate hike is usually seen as negative for Asian capital markets, as it tends to push up domestic interest rates and leads to a stronger U.S. dollar, both a problem for regional companies.

So far, investors have been out ahead of the Fed. That's not happening this time. "The challenge for the Fed now is to ensure that the market doesn't start extrapolating a much more rapid series of hikes".

Analysts said apart from the immediate impact of a rate hike on Wednesday, future guidance on rates, growth and inflation outlook will be key for GCC economies.

However, there are still plenty of risks on the horizon for the markets, Piegza said.

Airline stocks had some of the market's biggest losses after the industry canceled thousands of flights in the face of fierce snowstorms. Activist investor Bill Ackman's Pershing Square said Monday it has sold its investment Valeant. This increase is led by financials and energy stocks. The so-called core PPI rose 0.2 percent in January.

This may disrupt the positive sentiment on local property counters following the Government's surprise move last Friday to relax the rules around the seller's stamp duty, among other changes. Scotland's first minister, meanwhile, called for a referendum for Scotland to break free of the United Kingdom.

The dollar slid lower against the yen, with USD/JPY down 0.24% to 114.59, off Friday's seven-week highs of 115.49.

New Zealand interest rates are on the move - U.S. 10 year bond yields last traded at 3.15 per cent from 2.15 per cent last August.

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