Dollar strong ahead of Federal Reserve meeting

U.S. stock index futures declined, while the dollar held gains versus major peers, with the Federal Reserve meeting this week to debate the outlook for interest rates. Crude oil fell with palladium as copper rose.

Standard & Poor’s 500 Index futures lost 0.2 percent yesterday morning after the U.S. equity gauge fell 0.5 percent from a record on Friday. Contracts on the Nikkei 225 Stock Average dropped 0.1 percent in Chicago. Oil in New York and London dropped, with palladium down 0.2 percent, while copper futures added 0.2 percent.

The Fed will meet before payrolls data is released Friday, with a report last week showing claims for U.S. jobless benefits were at an eight-year low. Chinese industrial company profit jumped the most last month since September, data showed. Israel resumed its offensive against Hamas militants in the Gaza Strip after a lull in fighting, while the U.S. said it had photos of Russia shelling Ukraine. Markets in Indonesia, Malaysia and Singapore are closed today for holidays.

“Data due this week will determine whether this dollar strength is justified, with the calendar packed with top-tier U.S. releases,” Raiko Shareef, a markets analyst in Wellington at Bank of New Zealand, wrote in an email to clients. He said the Fed Open Market Committee meeting “should be straightforward - another $10 billion taper down to $25 billion - but there will be intense interest on whether or not the committee firms up its language on inflation or employment.”

Employers probably added 231,000 workers to nonfarm payrolls in July, after a 288,000 increase in June, according to 69 economists’ estimates. The Markit Economics composite and service industries purchasing managers’ indexes for the U.S. are due today, along with data on pending home sales. An update on second-quarter gross domestic product is scheduled for tomorrow, with the FOMC meeting starting today.

Nikkei 225 futures fell to 15,415 on the Chicago Mercantile Exchange after gaining 0.6 percent to 15,425 July 25. Contracts on the Osaka pre-market were bid at 15,420 yesterday morning, unchanged from late Saturday and down from 15,450 at the close in Japan on Friday. The yen declined 0.5 percent versus the dollar last week, the biggest drop among 11 Asian currencies. The Nikkei 225 rose 1.1 percent on Friday.

The MSCI Asia Pacific Index ended Friday at the highest level since June 2008, up 1.4 percent for its 10th weekly gain in 11 weeks. It traded at 13.6 times estimated earnings for member companies, the highest valuation since December.

Futures on Australia’s S&P/ASX 200 Index lost 0.1 percent in trading that ended July 26, with contracts on the Kospi index in South Korea down the same amount.

Hang Seng Index futures and contracts on the Hang Seng China Enterprises Index both dropped 0.1 percent in most recent trading.

Bloomberg