Stocks, bonds hold ground before Fed; oil slips: Markets wrap

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Stocks and bonds posted modest moves as investors held back ahead of the Federal Reserve’s interest-rate decision, with markets expecting its first hike since 2023. Oil’s rally paused.

MSCI’s Asian equities gauge rose 0.2 per cent, snapping a four-day losing streak, while equity-index futures for Wall Street benchmarks edged up 0.1 per cent before Wednesday afternoon’s announcement in Washington. Traders are pricing in a more-than-90 per cent chance of an increase.

Treasuries consolidated, while government bonds edged up in Australia and New Zealand.

A rally in energy prices — with global benchmark Brent surging about 20 per cent this month — and growing bets on a rate hike had fueled a bond selloff, pushing the 10-year Treasury yield as high as 5.04 per cent Tuesday, the highest in almost two decades. The yield slipped to 4.98 per cent in Asian trading.

Some relief came as Brent dropped 0.6 per cent to about $108.10 a barrel as a rally driven by supply disruptions left gains looking overdone, and a US industry report pointed to a rise in stockpiles.

The Fed is in focus after hotter-than-expected core inflation last week and concerns over government budgets bolstered bets that Chair Kevin Warsh and his colleagues will tighten monetary policy. Higher rates would come as surging energy prices threaten to keep inflation elevated, while rising bond yields increase financing costs and add another headwind for equities.

“Given the amount of tightening already factored in, and new Chair Warsh’s dislike of ‘forward guidance,’ we believe it might be difficult for the Fed to be more ‘hawkish’ than what is baked in,” said Peter Dragicevich, Asia Pacific currency strategist at Corpay Inc. “A burst of volatility is likely post the Fed announcement, and we see risks the dollar weakens after the event.”

What Bloomberg’s Strategists Say

“There is an eerie calm across Asian markets which belies the risk events stacked up for the remainder of this week. Macro traders appear to be convinced that yields and oil prices will stay elevated, but stocks will avoid a meltdown, whatever the outcome from the FOMC, BOE and BOJ.”

— Mark Cranfield, MLive Strategist. Click here for the full analysis.

In other corners of the market, gold steadied around $4,310 an ounce after two days of losses. Higher interest rates typically diminish the appeal of the non-yielding metal. A Bloomberg gauge of the dollar was little changed.

Elsewhere, Bitcoin held losses to trade around $75,900 as the US Senate blocked a landmark crypto market structure bill.

Central bank decisions remain the main focus this week, with the Fed followed by policy announcements in the UK and Japan that could reshape the monetary-policy outlook for the rest of 2026.

A decision by the US central bank to hold rates — or a hike without clear guidance on further increases — may push investors to demand higher long-term yields as protection against inflation, while shorter-dated yields track the Fed’s policy path more closely.

Officials have held their benchmark rate steady in a range of 3.5 per cent-3.75 per cent since December as a majority of policymakers argued that progress in lowering inflation was being stalled by temporary factors.

“It will be important to hear some of the statements from Kevin Warsh to see what the expectations and the trajectory will be for the remaining few months of 2026,” Ken Wong, an Asia equity portfolio specialist at Eastspring Investment, said on Bloomberg TV.

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