Friday, March 29, 2024 | Ramadan 18, 1445 H
clear sky
weather
OMAN
25°C / 25°C
EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Asian shares slip as investors await Fed for rate clues

1112448
1112448
minus
plus

TOKYO: Asian shares slipped on Tuesday, hobbled by uncertainty as traders awaited a Federal Reserve meeting for clues on US monetary policy, though sentiment was supported by record highs on Wall Street.


MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2 per cent after wobbling between positive and negative territory in early trading.


Futures suggested a lacklustre start to the European trading day, with the Eurostoxx 50 and FTSE futures both slightly lower, and DAX futures up 0.1 per cent


On Wall Street on Monday, the Dow Jones Industrial Average closed at a record high for the fifth straight session, and the S&P 500 marked its second straight closing record high, as higher US Treasury yields helped lift financial shares.


At a two-day meeting beginning later on Tuesday, the Fed is expected to take another step towards policy normalization and announce plans to begin unwinding its $4.2 trillion portfolio of Treasuries and mortgage-backed securities.


The Fed is expected to hold interest rates steady, with investors looking for clues on its anticipated pace of further tightening later this year and next.


The market is pricing in an approximately even chance of a hike in December.


“If the Fed does keep the option for December alive, and reaffirms its view in terms of gradual rate increases, that may be dollar-supportive, given the more benign rate-hike path priced by the market,” said Mitul Kotecha, head of Asia macro strategy for Barclays in Singapore.


“This is likely to give the dollar support going into the end of this week,” he said. “So we might see Asian currencies fail to make any significant gains, and they may even be on the back foot, if we do see the dollar resume more upside,” Kotecha added.


Japan’s Nikkei stock index ended 2 per cent higher after touching its highest levels since late June, catching up to global equities gains and a weaker yen as Tokyo markets reopened after a public holiday on Monday.


On Thursday, the Bank of Japan will also hold a regular policy meeting, and is widely expected to maintain the status quo as inflation remains stubbornly weak despite a modest economic recovery.


Investors were also debating any potential market impact from a possible snap election.


Prime Minister Shinzo Abe is considering calling a poll for as early as next month to take advantage of his improved approval ratings and disarray in the main opposition party, according to government and ruling party sources.


“There has been concern among foreign investors, about the future of Abenomics and the Abe administration, with clear declines in Abe’s approval ratings earlier this year,” said Stefan Worrall, director of Japan equity sales at Credit Suisse in Tokyo.


“If Abe is cemented in power for another few years, that would be a market-positive event,” he said. “Certainty is preferred to uncertainty, when it comes to market confidence.”


The Nikkei has gained nearly 30 per cent since Abe attained political power in late 2012.


South Korean shares dipped 0.1 per cent, against a backdrop of caution ahead of the Fed meeting as well as continuing tensions on the Korean peninsula.


US Defence Secretary Jim Mattis hinted on Monday about the existence of military options on North Korea that might spare Seoul from a brutal counterattack.


But he declined to say what kind of options he was talking about or whether they involved the use of lethal force.


The dollar index, which tracks the greenback against a basket of six major rivals, inched 0.1 per cent lower to 91.928. The euro was 0.2 per cent higher at $1.1980.


The dollar added 0.2 against its Japanese counterpart to 111.81, its highest since late July. Higher US yields bolstered the greenback, with the benchmark 10-year note yield notching a one-month high of 2.237 per cent overnight. — Reuters


SHARE ARTICLE
arrow up
home icon