Washington, US (BBN) – Here are the top five things you need to know in financial markets on Tuesday, December 12.
1. OIL PRICES JUMP ON PIPELINE SHUTDOWN
Brent crude futures, the international benchmark for oil prices, passed the $65 mark on Tuesday to hit their highest level since June 2015 as a shutdown of a North Sea pipeline raised concerns of a supply shortage, reports Investing.com.
The UK’s Forties oil pipeline, the country’s largest at a capacity of 450,000 barrels per day (bpd), shut down on Monday after cracks were revealed.
The pipeline carries about 40% of UK North Sea crude oil, Britain’s largest capacity transporting about 450,000 barrels a day.
The news sent the London barrel soaring to an intraday high of $65.70. At 6:07AM ET (11:07GMT), Brent oil was last up 1.38% at $65.57, while futures for the U.S. benchmark gained 0.53 % at $58.30.
2. FED KICKS OFF 2-DAY MEETING WITH RATE HIKE PRICED IN
The Federal Reserve kicks off its two-day monetary policy meeting on Tuesday and is widely expected to raise the fed funds target range by a quarter point at the conclusion a day later at 2:00PM ET (1900GMT).
According to Investing.com’s Fed Rate Monitor Tool, Fed fund futures fully price in the increase to a range between 1.25%-1.50%.
In that sense, markets will play close to attention to Fed chair Janet Yellen’s press conference 30 minutes after the release of the Fed’s statement, as investors look for fresh clues on the likely trajectory of monetary policy in the months ahead.
The U.S. central bank will also release its latest forecasts for economic growth and interest rates, known as the “dot-plot”. The Fed has forecast three rate rises for next year, and it is expected to keep its outlook about the same even though the market has been skeptical it will hike as much as it expects.
The dollar showed cautious trade on Tuesday as market participants waited for the big event. Later on Tuesday, investors will also digest factory gate prices out at 8:30AM ET (13:30GMT).
At 6:08AM ET (11:08GMT), the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slipped 0.13% at 93.82.
3. GLOBAL STOCKS TAKE BREATHER AS FOCUS TURNS TO CENTRAL BANKS
Wall Street managed to shrug off a terror incident in New York city’s Times Square (NYSE:SQ) with the S&P and Dow closing at new record highs. But U.S. futures pointed to a cautious open on Tuesday as traders opted to refrain from bigger moves higher ahead at the start of the Fed’s two-day meeting. At 6:08AM ET (11:08GMT), the blue-chip Dow futures edged forward 17 points, or 0.07%, S&P 500 futures inched up less than a point, or 0.01%, while the Nasdaq 100 futures slipped 1 point, or 0.01%.
European equities showed cautious gains as market participants prepared for local monetary decisions from both the European Central Bank and the Bank of England on Thursday. At 6:09AM ET (11:09GMT), the benchmark Euro Stoxx 50 advanced 0.18%, but Germany’s DAX wavered around the unchanged mark, while London’s FTSE 100 gained 0.28%.
Earlier, Asian shares took a small step back gaining for three straight sessions, with markets consolidating in the hope an upswing in global growth could outlast a likely hike in U.S. interest rates this week.
4. BITCOIN FUTURES PULL BACK AS VOLUME DECREASES
CBOE Bitcoin futures pulled back on its second full day of trading Tuesday as the hype appeared to momentarily die down and volume on the January contract eased with less than 300 contracts traded so far compared to nearly 4,000 on the first day.
Meanwhile, on the U.S.-based Bitfinex exchange, the underlying Bitcoin was also taking a breather, nearly unchanged at $16,766.0, by 6:11AM ET (11:11GMT) Wednesday, after having risen as high as $17,443.0 a day earlier.
5. UK INFLATION INCREASES PRESSURE AHEAD OF BOE RATE DECISION
Consumer price inflation (CPI) in the UK hit a fresh five-year high in November, putting pressure on the Bank of England to tighten policy, official data showed on Tuesday.
In a report, the UK Office for National Statistics (ONS) said the rate of consumer price inflation rose from the year before by a seasonally adjusted 3.1% last month. That was the highest level since March 2012 and settled above forecasts for the reading to match the 3.0% increase seen in October.
The data reflects a constant cost of living squeeze in the UK as wages have only increased by 2.1%, meaning that British salaries are unable to keep up with price increases.
The Bank of England will announce its rate decision at 7:00AM ET (12:00GMT) on Thursday, with analysts expecting no major change in policy, as policymakers grapple with uncertainty over Brexit, low wage growth and weak productivity, which are all weighing on the economy.