Asian Stocks and Wall Street Edge Higher Before Fed Meeting

The S&P 500 and Dow Jones Industrial Average both gained in travel stocks on Monday. Mass vaccinations in the United States and congressional approval of a $1.9 trillion aid bill have been sources of optimism for investors.

The Federal Reserve should conclude its two-day policy meeting on Wednesday. Investors are focusing on it. Bond yields have surged this year because investors were betting that central bankers will need to raise rates soon to contain inflation. By the fastest rate in decades, markets expect the Fed policymakers to forecast that the U.S. economy will grow in 2021.

On Tuesday, Asian stocks rose, following Wall Street’s main indexes’ growth to record highs. This was due to investors looking to key central bank meetings this week, including the one of Federal Reserve’s, to start with.

An index of the region’s share markets excluding Japan firmed up 0.7%. This was led by a 1.2% gain in Australia’s benchmark S&P/ASX 200 index.

In Japan, the Nikkei 225 added 0.6% to just below the closely watched 30,000 mark. Similarly, the broader Topix added 0.5%.

Meanwhile, China’s blue-chip CSI 300 index and Hong Kong’s Hang Seng both climbed 0.7%.

Moreover, the E-mini futures for the S&P 500 ticked up 0.06%.

Central Bank Meetings This Week

On Thursday, the Bank of England also meets. Meanwhile, the Bank of Japan should gather for its two-day conference on Friday.

Analysts at TD Securities wrote that markets are likely to be in a holding pattern ahead of this heavy central bank-laden week.

Stocks report on Wall Street showed that the Dow Jones Industrial Average advanced 174.82 points, or 0.53%, to 32,953.46. The S&P 500 rose 25.6 points, or 0.65%, to 3,968.94. The Nasdaq Composite was up 139.84 points, or 1.05%, to 13,459.71. 

Airline shares were higher, with the companies pointing to concrete signs of an industry recovery. This was due to vaccine rollouts that helped to encourage leisure bookings.

On Monday, the pan-European STOXX 600 index was unchanged. In the previous session, it hit its highest level since February 2020.

Longer-term U.S. Treasury yields further slid on Tuesday as the market braced for the Fed meeting. Besides, markets were looking forward to the latest government debt auctions.

Meanwhile, the benchmark 10-year yield was back at 1.595%. It reached a more than one-year high of 1.642% last week. 

Inflation Worries and Retirees

The general public is expecting inflation, which could prompt the Federal Open Market Committee to consider starting to raise rates sooner. 

Retirees suffer more from high inflation. In the 1970s, those in retirement lived on a fixed income that was hit the hardest. Prices rose year after year, and the investment returns from their bonds and cash fell way behind. Sadly, bonds were described as ‘certificates of confiscation’, and every year, retirees got poorer.