Snapshot: -Dollar steady; 10-year Treasury yield 2.160%; U.S. stock futures gain; Nymex $43.94; gold $1066.50
-Watch for: ISM-NY Report on Business; weekly mortgage applications survey; speeches by Janet Yellen, Dennis Lockhart; EIA weekly petroleum status report; Fed Beige Book; earnings from Brown-Forman, Box, Aeropostale.
News: Monetary Policy Path Likely to be 'Cautious and Gradual,' Brainard Says; Eurozone Inflation Remains Weak; Bank of Japan to Act if China Slowdown Risks Inflation Target
Markets Outlook:
Forex: The euro was flat against the dollar Wednesday at $1.0622, but is down nearly 5% since the start of October.
Some investors think the euro's decline is overdone.
"Whatever the ECB decision, you'll see a recovery of the euro," said Tristan Abet, investment strategist at Louis Capital Markets, adding that the currency has fallen too far and too fast.
Elsewhere, the dollar was up 0.2% against the yen at Y123.0980, and has now strengthened 2.7% since the start of October.
"We probably are seeing the calm before the storm," said Yuzo Sakai, manager of foreign-exchange business promotion at Tokyo Forex & Ueda Harlow. "There is no need to test both upside and downside ahead of the event," said Mr. Sakai.
The dollar is now hovering around a level investors consider "comfortable," until they find their next trading cues, said Mr. Sakai.
Fed chief Janet Yellen is due to speak twice on Wednesday in Washington, D.C., giving opening remarks at an event for college students at 8.30am ET and then talking about the economic outlook at 12.25pm.
Ms. Yellen, who is also due to testify before a Congressional panel on Thursday, will continue to make the case that an interest rate hike is coming soon and could come as soon as this month. She won't feel any need to tell investors that a December hike is a done deal.
Other Fed signals due Wednesday include a speech by Atlanta Fed President Dennis Lockhart at 8.10am ET in Fort Lauderdale, Fla., as well as remarks by Fed. Gov. Daniel Tarullo at 9am at an event in Arlington, Va. The Fed's Beige Book survey is due at 2pm.
In other economic news, a reading on U.S. private-sector employment is expected at 8.15am, followed by a report on productivity and costs at 8.30am.
Bonds: In early European trade, the yield on the 10-year government bond was 2.160% against 2.155% on Tuesday.
The yield premium that investors get for buying longer-term debt slimmed to its narrowest in nine months on Tuesday, at 1.25 percentage points. By flattening the yield curve, which charts prevailing interest rates across debt maturities and is viewed as a gauge of economic health, the bond-trading action underscored investor skepticism about the central bank's leeway to raise interest rates repeatedly.
"The Fed wants to get off the zero level and give itself some ammunition for future slowdowns," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York, saying Fed officials prefer higher short-term interest rates because they enable the central bank to cut rates to stimulate economic activity in a downturn. "But inflation is not a worry, and the economy is growing but only very slowly."
Equities: U.S. stock futures inched higher, helped by Yahoo's jump as investors waited for fresh signals from the Federal Reserve.
S&P 500 futures rose 2.85 points, or 0.1%, to 2,102.75, while Dow Jones Industrial Average futures gained 31 points, or 0.2%, to 17,893. Nasdaq 100 futures tacked on 9.75 points, or 0.2%, to 4,726.
Shares in Yahoo jumped 6.8% premarket in the wake of news late Tuesday that it may sell its core Internet business.
The ailing Web portal was the biggest premarket gainer among S&P 500 stocks.
Commodities: Oil prices fell in Europe on expectations that the U.S. crude stockpiles increased last week, adding to an expanding global surplus of crude.
Industry group American Petroleum Institute reported late Tuesday that the U.S. crude inventories rose 1.6 million barrels last week. Analysts surveyed by The Wall Street Journal expect inventories to have declined by 300,000 barrels. The U.S. Energy Information Administration will release the official data later Wednesday.
"The official EIA report this afternoon will be followed closely--should we see another build today, this could cause some volatility and weigh on oil prices," said Michael Poulsen, oil analyst at Global Risk Management.
Brent crude, the global oil benchmark, fell 1.1% to $43.96 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 1% at $43.94 a barrel.
The EIA will also release its latest estimate of U.S. oil production.
Investors will be looking for OPEC's meeting on Friday but few expect the oil cartel to deviate from its policy of pumping crude flat out as it looks to gain market share.
Spot gold prices were slightly lower in Europe, trading down 0.1% at $1,066.50/oz, as the dollar strengthened.
Looking ahead, prices were likely to remain rangebound as "most players seem to be happy to remain on the side lines until the FOMC meeting in two weeks' time," said David Govett, head of precious metals at Marex Spectron, in a note.
=======Calendar=======
ET
0700 US MBA Weekly Mortgage
Applications Survey
0810 US Federal Reserve Bank
of Atlanta President
Dennis Lockhart speech
0815 US ADP National Employment
Report
0830 US Janet Yellen speaks
0830 US Revised Productivity
& Costs
0900 US Govt financial agencies
hold final outreach
meeting on reviewing
regulations
0945 US ISM-NY Report on
Business
1000 CAN Bank of Canada interest
rate announcement
1000 US Online Help Wanted Index
1030 US EIA Weekly Petroleum
Status Report
1215 US Janet Yellen addresses
Economic Club
of Washington
1400 US Federal Reserve
Beige Book
======================
Top Stories Of The Day: Monetary Policy Path Likely to be 'Cautious and Gradual,' Brainard Says
The path of increases in short-term interest rates is likely to be "cautious and gradual" once the Fed begins to tighten monetary policy, Lael Brainard says.
Eurozone Inflation Remains Weak
The eurozone's annual rate of inflation was unchanged in November, remaining far below the European Central Bank's target as policy makers consider whether to provide more stimulus at their meeting Thursday.
Bank of Japan to Act if China Slowdown Risks Inflation Target
Bank of Japan Deputy Gov. Kikuo Iwata said the central bank is on track to achieve its target of 2% inflation, although it will act quickly if a Chinese economic slowdown undermines price trends.
IEA Chief Reiterates Forecast for $80 Oil
Oil prices will start climbing in 2017, rising to $80 a barrel in coming years as production declines in some regions and global demand continues to grow, the executive director of the International Energy Agency said Tuesday.
Australian Economy Expands Strongly
Australia's resource-rich economy expanded strongly in the third quarter on the back of a surge in commodity exports, government data Wednesday showed.
Turkey Border Deal Spurs On Migrants
Thousands of migrants are making a last-ditch effort to reach Greek islands before Turkey and Europe put in place a new plan to tighten their borders.
Talks With Russia on EU-Ukraine Trade Deal Fail to Reach Compromise
A month from the deadline for implementing a trade pact between Ukraine and the EU, a fresh round of discussions with Moscow aimed at mitigating Russian concerns about the deal produced no breakthrough.
Write to paul.larkins@wsj.com
(END) Dow Jones Newswires
December 02, 2015 06:21 ET (11:21 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
