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- Asian stocks edged up to a three-week high on Thursday while the dollar drifted lower against other currencies as investors consolidated positions ahead of a nail-biting U.S. Federal Reserve policy decision. The U.S. Fed is considering raising U.S. interest rates for the first time since 2006, although economists are split in their expectations. The Fed’s decision is due at 1800 GMT. While financial markets have expected a Fed rate increase for most of this year as the U.S. economy has shown signs of picking up, those expectations have faded in recent weeks thanks to global financial market turmoil, especially in China. Even if the Fed were to raise rates, many market players expect officials to signal a dovish stance, rather than herald a series of interest rate increases. Perhaps more worryingly for Asian markets in coming months, earnings growth expectations have been steadily revised lower signaling a bleak economic outlook whether or not the U.S. raises interest rates.
- The Federal Reserve began a two-day policy meeting on Wednesday with economists evenly split on whether Thursday will see the first official U.S. interest rate rise since 2006. The decision by the U.S. central bank’s Federal Open Market Committee (FOMC) is expected on Thursday at 2 p.m. (1800 GMT). U.S. economic data are flashing conflicting signals, with unemployment falling but inflation subdued, while slowing growth in China has led to a 40 percent fall in Shanghai stocks in three months, leaving global markets on edge. Global banks and investment funds see the chances for a rate increase as essentially a toss-up, although most experts see a slightly higher probability for no change in monetary policy. The Federal Reserve is mandated by Congress to consider both unemployment and inflation when formulating monetary policy. The U.S. unemployment rate fell to 5.1 percent in August, a level the Fed sees as likely to boost both wages and inflation, but average hourly earnings have risen only 2.2 percent in the past year.
- Oil prices were steady in early trade on Thursday after a large U.S. stock draw tightened the market, while traders kept a close eye on whether the Federal Reserve would later in the day raise interest rates for the first time in almost a decade. Crude prices jumped as much as 6 percent on Wednesday, when data from the U.S. Energy Information Administration showed the largest crude drawdown in seven months at the key delivery point in Cushing, Oklahoma. Higher U.S. interest rates would likely attract cash from money traders, lifting the dollar. That could be bearish for dollar-denominated oil as it would make fuel more expensive for importers who hold other currencies. Some analysts said this week that oil markets may have bottomed out following over a year of tumbling prices as producers start cutting back output. n its Weekly Petroleum Status Report on Wednesday morning, the U.S. EIA said U.S. commercial crude oil inventories for the week ending on September 11 fell by 2.1 million barrels from the previous week. It followed estimates of a 3.1 million draw by the American Petroleum Institute on Tuesday evening. At 455.9 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Motor gas inventories increased by 2.8 million barrels last week, while distillate fuel inventories increased by 3.1 million barrels. A week earlier, the EIA and API both reported builds in excess of 2.0 million for the week ending on Sept. 4. Energy traders are keeping a close eye on the supply-demand balance in global energy markets, amid a glut of oversupply. Energy markets have been saturated by excess supply since last November when OPEC depressed prices with a strategic decision to keep its production ceiling above 30 million barrels per day.