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Morning Bid: Eye on interest rates in China, oil hits new high

A woman walks past the headquarters of the People’s Bank of China (PBOC), the central bank, in Beijing, China, September 28, 2018. REUTERS/Jason Lee/File Photo ACKNOWLEDGE RIGHTS

Sept 19 (Reuters) – A look at the day ahead in Asian markets from financial markets columnist Jamie McGeever.

China is expected to leave interest rates unchanged on Wednesday, putting it in the spotlight in Asia as the relentless rise in oil prices toward $100 a barrel bites deeper into investor sentiment worldwide.

The latest trade data from Japan, export orders from Taiwan, producer price inflation figures from South Korea and New Zealand’s second-quarter current account balance are also on the regional calendar on Wednesday.

The most important event of the day on Wednesday is of course the Federal Reserve’s monetary policy meeting, where the US central bank will announce its latest interest rate decision and present its new forecasts, and Chairman Jerome Powell will hold a press conference.

The Fed will almost certainly keep interest rates at 5.25% to 5.50%. Interest rate futures markets are pricing in a 30 percent chance of a quarter-point increase in November and a 40 percent chance in December.

Aside from the Fed’s updated summary of economic forecasts, current momentum in oil prices and bond yields alone could be enough to keep the Fed on track to raise rates again this year.

The price of oil is rising every day and is approaching $100 per barrel. Unsurprisingly, US bond yields are refusing to fall – two-year and 10-year yields posted their highest close since 2007 on Tuesday, with the two-year yield continuing to rise above 5.00%.

Stocks and risk assets are feeling the effects of the crisis. World stocks fell for the third straight day on Tuesday and Wall Street’s three main indexes closed in the red, although they pared steeper losses earlier in the day.

Asian markets won’t be able to react to the Fed until Thursday, so Wednesday’s direction could come from events on the ground.

China’s central bank is expected to hold interest rates on hold as new signs of economic stabilization and a weaker yuan cap curb further monetary easing efforts, at least for now.

All 29 market analysts and traders surveyed by Reuters

Meanwhile, on the geopolitical front, attention turns to the 78th United Nations General Assembly in New York. Investors can expect headlines from the already planned and announced official meetings between world leaders, as well as the sideline bilateral meetings.

Here are key developments that could give markets more direction on Wednesday:

– Interest rate decision for China

– Japan trade (August)

– United Nations General Assembly

By Jamie McGeever; Editing by Josie Kao

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and bias in accordance with the Trust Principles.

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Jamie McGeever has been a financial journalist since 1998, reporting from Brazil, Spain, New York, London and now back in the USA. Focus on the economy, central banks, policymakers and global markets – particularly foreign exchange and fixed income. Follow me on Twitter: @ReutersJamie

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