World stocks inch to a three-week highs and the dollar drifts lower against other currencies, as investors consolidate positions ahead of a nail-biting U.S. Federal Reserve interest rate decision. David Pollard looks ahead to the much-anticipated meeting.
China's slowdown has been the headline story in recent weeks. But here there's an air of business as usual as the Chinese president meets US business leaders in Beijing. The headline act today is the Federal Reserve. Will it, won't it - and if it doesn't - hike, that is - will China be a factor? London Capital Group's Brenda Kelly says: just look at the sharp drop in China's commodity use. (SOUNDBITE) (English) HEAD ANALYST, LONDON CAPITAL GROUP, BRENDA KELLY, SAYING: ''The commodities sector gives you a better window into what's happening in China than the official data that's coming out of there, so the risk is that China will actually look much softer than what is pertaining to be and the Fed will have egg on its face having hiked interest rates in the wake of what could become quite a global problem.'' Here in Japan, another reason why China might swing the Fed to 'no change': the ripple effect. Japanese exports slowed for a second straight month in August - exports to China, its largest trading partner, were down 4.6 per cent. The US economy seems OK for now - and with a strengthening jobs market, has hit the Fed employment target for a hike. But with consumer prices rising just 0.2 per cent on the year, it's way off the other: an inflation target of 2.0 per cent. (SOUNDBITE) (English) HEAD ANALYST, LONDON CAPITAL GROUP, BRENDA KELLY, SAYING: ''The US, vis-a-vis most of the Western economies, is still struggling and despite the fact that we've seen quantitative easing, which many were expecting to stoke inflation, possible financial armageddon, it actually isn't coming to pass.'' 45 out of 80 economists in a Reuters survey expect no change. That still means nearly half see a hike coming. A big split that hints markets are heading for a volatile reaction. Whichever way the Fed goes, brace for impact.