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US stocks at records, dollar weaker as Fed meets

New York - Major US equity benchmarks padded all-time highs, the dollar fell and Treasuries edged lower after Donald Trump gave a speech to the United Nations and as the Federal Reserve began a two-day meeting.

The S&P 500 Index climbed for a third day, though equities remain stuck in one of the tightest ranges in decades. The CBOE Volatility Index slumped toward 10. Europe’s equity benchmark followed many Asian peers lower, while Japanese shares surged after a holiday.

The pound swung before jumping after a report Foreign Secretary Boris Johnson may resign should Prime Minister Theresa May oppose his Brexit demands.

The euro rose for a fourth day, while the dollar slipped against all but one of its G-10 peers. Benchmark WTI crude fell below $50 per barrel.

Financial markets remained largely calm on Tuesday as Trump’s speech to the UN did little to alter views on the tensions over North Korea’s nuclear ambitions. Attention will turn to Wednesday’s Fed decision, with a focus on details on unwinding part of the central bank’s $4.5trn balance sheet.

"We are not overly concerned about" the Fed’s quantitative-tightening plans, Merrill Lynch and US Trust head of fixed-income strategy Matthew Diczok told Bloomberg TV.

"If you model it out, over about the next three years they’ll take out about $1.3trn or so. That’s only a third of what they put into the market.

So it’s going to be very slow, very gradual, and very deliberate and it shouldn’t lead to any near-term fireworks into the market at all."

What to watch out for this week:

Brexit strategy is in focus as Theresa May prepares to outline her revised approach on Friday. The Fed’s rate decision is on Wednesday. The Bank of Japan is predicted to stand pat when it reviews policy on Thursday.

The BOJ probably won’t reveal when it will unwind stimulus, but could signal determination to keep the yield curve under control.

Indonesia, the Philippines and South Africa are among countries also reviewing monetary policy this week.

Home construction and sales of previously owned properties are the highlights of the week’s US economic calendar. Campaigning continues in Germany, days before the September 24 election.

New Zealand goes to the polls on September 23.

Here are the main moves in markets:

Stocks

The S&P 500 Index climbed 0.1% to 2 506.64 as of 4 p.m. in New York. The Dow Jones Industrial Average added 0.2% to 22 370.70, and the Nasdaq Composite Index rose 0.1%.

The Stoxx Europe 600 Index was virtually unchanged after erasing earlier declines.

The MSCI All-Country World Index increased 0.3% to the highest on record. The MSCI Emerging Market Index dropped 0.2%.

Currencies

The Bloomberg Dollar Spot Index decreased 0.1%, with the greenback dropping versus all G-10 peers save the Swiss franc. The euro climbed 0.4% to $1.1997, the strongest in more than a week.

Bonds

The yield on 10-year Treasuries was slightly higher at 2.2375%. The bond-market selloff that pushed intermediate and long-term Treasury yields up from 2017 lows reached September 8 is on the brink of making five-year notes a buy, according to technical analysis by Aaron Kohli at BMO Capital Markets.

Toys "R" Us succumbed to what it called a "dangerous game of dominoes" that toppled it in a matter of days.

Commodities

Gold futures slipped less than 0.1% to settle at $1,310.60 an ounce as of 1:39 pm in New York. West Texas Intermediate crude fell for the first time in more than a week as traders awaited storage data that may show the longest expansion of US crude inventories in almost half a year.

WTI futures lost 0.9% to settle at $49.48 a barrel.

Coal will drop and stabilize about 10% lower than current levels after tight supply and strong demand from Asian consumers drove prices to near $100 a ton, according to producer New Hope.

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