Fed Announcements And Italian Budget Decisions Loom: 5 Things The Global Markets Are Talking About Today

Global stocks were trading mixed ahead of Wednesday's FOMC rate decision, with Asian shares closing out higher, while Euro bourses moved a tad down — Italy's budget talks continue to be a worry.

The Italian government has until tomorrow to outline its fiscal and economic projections ahead of a budget law discussion due to take place in October. Currently, the markets remains concerned that the government will try to pass a budget that is out of step with E.U. rules.

The Fed is expected to raise interest rates by 25 bps to a corridor of 2-2.25 percent as it continues to roll back easy-money policies.

Market attention will focus on the forward guidance, including the new dot plot diagram, to gain insight into the plans for 2019 and beyond.

Currently, the U.S. dollar trades steady while U.S. Treasury yields trade atop of their the 7-year highs reached in May.

Note: Wednesday's Fed decision, to be announced at 2:00 pm EDT, will be followed by a press conference with Chair Jerome Powell.

With all this in mind, here are five things the global markets were talking about on Wednesday.

1. Mixed Equities Ahead Of Fed Announcements

In Japan, gains overnight lifted the Nikkei to an 8-month high. The index was able to overcome the impact from a number of companies' stock prices being adjusted lower amid looming dividend payments. The index rallied 0.4 percent. Again helping was the U.S. dollar briefly hitting a 2-month high and breaching ¥113.

In Australia, the S&P/ASX 200 was able to squeeze out a slight gain and closed 0.1 percent higher. Energy stocks rose a further 0.9 percent as oil prices rallied, while materials gained 0.8 percent. But financials fell 0.6 percent and health care dropped 0.7 percent.

Note: South Korea's markets were closed for a holiday.

In China, stocks rallied overnight on hopes that global index provider MSCI would consider quadrupling the weighting of Chinese big-caps in its global benchmarks. At the close, the Shanghai Composite index was up 1 percent, while the blue-chip CSI300 index was up 1.1 percent.

In Hong Kong, shares followed the region higher on receding trade war fears and high oil prices. The Hang Seng index rose 1.2 percent, while the China Enterprises Index gained 1.5 percent.

2. Brent Trades Near 4-Year High, But U.S. Crude Retreats

While global trade tensions remain a source of investor concern, rising oil prices are taking on a greater importance.

Despite President Trump calling for increased crude output from OPEC, crude prices have been lifted by the pending U.S. sanctions on Iran in November.

Producers fear pumping more oil to compensate for lower output from Iran and Venezuela could mark a return of oversupply.

Brent crude was up 0.1 percent at $81.87 a barrel after gaining nearly 1 percent on Tuesday. Brent rose on Tuesday to its highest since November 2014 at $82.55 per barrel.

U.S crude futures (WTI) are down to $72.24 a barrel. The futures climbed 0.3 percent on Tuesday to close at their highest level since July 11.

U.S. data on Wednesday showed that domestic crude stockpiles unexpectedly climbed last week. API data showed that inventories rose by 2.9 million barrels in the week ending September 21 to 400 million, compared with market expectations for a decrease of 1.3 percent barrels.

Expect dealers to take their cue from Wednesday's official figures on stockpiles and refinery runs from the U.S. Department of Energy's Information Administration).

3. Italian Yields Fall On Budget Talks

Italian bond yields continue to trade under pressure in the run-up to the presentation of Italy's budget draft, scheduled for Thursday. A budget deficit below 2 percent gap to GDP is expected to give further support to Italian BTPs.

Italian government bond yields dropped across the curve on Wednesday morning. Short-term Italian yields fell 10 bps to 0.77 percent, while Italy's 5- and 10-year BTP yields dropped 5-7 bps.

4. Dollar Needs Guidance

The U.S. dollar was little changed ahead of the Fed's rate decision. While the Fed's monetary policy tightening is likely to end next year, investors are trying to figure out if most of the dollar's strength is behind us.

The Fed could remove the word "accommodative" from its statement, but consensus thinks this is most unlikely. Even if it does, the U.S dollar may still find it difficult to find support due to its trade and protectionist policies.

5. New Zealand Business Sentiment Rallies

Data overnight showed that New Zealand business sentiment lifted this month from a decade low even as firms remained pessimistic overall.

An ANZ Bank survey showed a net 38.3 percent of respondents expected the Kiwi economy to deteriorate over the year ahead — a previous poll showed 50.3 percent, which was its lowest reading since 2008.

Last month, the Reserve Bank of New Zealand (RBNZ) said gloomy business confidence was a major risk that could result in firms holding off on investment, dragging on growth and increasing the chances of another cut in official interest rates.

At 05:00 pm EDT, the RBNZ is widely expected to hold rates at a record low of 1.75 percent and signal plans to keep them there for an extended period of time.

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