The Japan Times - Stocks slip, dollar down as Fed meets on rates

While the S&P 500 and Nasdaq Composite set fresh record highs as trading got underway in New York, equities soon slid into the red.

Stocks have repeatedly set record highs in recent days as a series of data showing a softening of the labour market and moderate inflation have cemented expectations that the Fed will resume cutting interest rates.

"The Fed's focus appears to have shelved inflation concerns for now, instead concentrating on a stalling (US) jobs market, which should lead to a 0.25-percent cut," noted Richard Hunter, head of markets at Interactive Investor.

The rise in stocks, particularly in tech shares, has provoked some concern about them having become overvalued, but City Index and FOREX.com analyst Fawad Razaqzada said investors have largely shrugged off these worries.

"So, it looks like investors are taking no chances ahead of the FOMC meeting, choosing to take profit on what has been another amazing bull run for technology stocks," he said, referring to the Fed committee that sets interest rates.

Data released on Tuesday showed retail sales in the United States rose more than analysts expected in August, even as the effects of President Donald Trump's tariffs ripple through the US economy.

Overall sales jumped by 0.6 percent on a month-on-month basis in August, beating expectations of a 0.2-percent gain, showing US consumers are not holding back despite the softening jobs market.

Separate data showed US non-fuel import prices rose by 0.4 percent in August, following no gain in July.

"Today's data won't change the market's expectation that the Fed will vote tomorrow to cut the target range for the fed funds rate by 25 basis points to 4.00-4.25 percent, but it will presumably temper calls for a 50-basis-point cut," said Briefing.com analyst Patrick O'Hare.

The dollar dropped against main rivals on Tuesday as lower interest rates make the greenback less attractive to investors.

Expectations that US interest rates will be reduced over the next few months and possibly into 2026 pushed up gold to an all-time peak close to $3,700 an ounce.

The euro hit its highest level against the dollar since 2021.

The British pound firmed versus the dollar, with analysts increasingly expecting the Bank of England to maintain its key interest rate on Thursday and for the remainder of 2025.

Official data on Tuesday showed UK unemployment remaining at a four-year high of 4.7 percent amid stubbornly high British inflation.

European stock markets fell on Tuesday following a steady showing by Asia's main indices.

Shares in Germany's Thyssenkrupp rose around eight percent in Frankfurt after India's Jindal Steel International made an offer for the company's steel division.

Sentiment was also supported by Trump announcing on Tuesday that the United States and China had reached a deal over TikTok, which Washington says must pass into US-controlled ownership.

Trump said he would confirm the deal when he speaks with his Chinese counterpart Xi Jinping on Friday.

- Key figures at around 1530 GMT -

New York - Dow: DOWN 0.4 percent at 45,708.99 points

New York - S&P 500: DOWN 0.2 percent at 6,604.12

New York - Nasdaq Composite: DOWN less than 0.1 percent at 22,332.41

London - FTSE 100: DOWN 0.9 percent at 9,195.66 (close)

Paris - CAC 40: DOWN 1.0 percent at 7,818.22 (close)

Frankfurt - DAX: DOWN 1.8 percent at 23,329.24 (close)

Tokyo - Nikkei 225: UP 0.3 percent at 44,902.27 (close)

Hong Kong - Hang Seng Index: FLAT at 26,438.51 (close)

Shanghai - Composite: FLAT at 3,861.87 (close)

Euro/dollar: UP at $1.1841 from $1.1768 on Monday

Pound/dollar: UP at $1.3646 from $1.3609

Dollar/yen: DOWN at 146.60 yen from 147.38 yen

Euro/pound: UP at 86.78 pence from 86.47 pence

Brent North Sea Crude: UP 1.3 percent at $68.33 per barrel

West Texas Intermediate: UP 1.7 percent at $64.38 per barrel

burs-rl/rlp

K.Yoshida--JT