SINGAPORE: Asian stocks were mixed on Wednesday, moderating after earlier strong gains on positive global earnings and manufacturing data, while expectations that the US Federal Reserve will signal a June rate increase later in the session lifted the dollar.
Futures traders were on Wednesday pricing in a 63 per cent chance of a June rate hike, according to the CME Group’s FedWatch Tool, which was predicting an almost 72 per cent chance a week ago and a 59 per cent chance a month ago.
European markets are set for a muted start, with financial spreadbetters expecting Britain’s FTSE to open down 0.1 per cent, and both Germany’s DAX and France’s CAC to begin the day flat, after all posted gains on Tuesday.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1 per cent on Wednesday, after touching a near two-year high earlier in the day.
The MSCI World index surpassed Tuesday’s record to hit a new high on Wednesday.
Hung Tran, Executive Managing Director at the Institute of International Finance, said investors were currently struggling to price in outcomes amid a volatile political environment.
But “the very benign investment backdrop — supported by a cyclical upturn in the global economy, central bank liquidity and a persistent savings glut — has helped cushion markets from political shocks,” Tran wrote in a report.
Hong Kong and South Korean markets are closed for the Buddha’s birthday holiday, and Japan is shut from Wednesday until Friday for Golden Week.
Taiwan gained 0.1 per cent.
Singapore and Thailand were also higher, although Chinese shares pulled back almost 0.5 per cent.
Australian shares dropped 1 per cent, failing to find new catalysts to lift above a two-year high hit on Monday.
The pan-European Stoxx index jumped to its highest level since August 2015 on Tuesday.
Overnight, Wall Street closed higher, although Nasdaq futures fell alongside Apple shares in extended trading, after the company reported a surprise fall in iPhone sales for the second quarter. Net income still beat analysts’ estimates.
Markets are awaiting word from the Fed, which concludes its two-day meeting later on Wednesday.
With the central bank largely expected to hold interest rates steady, the focus will be on language about future increases.
Since the last meeting, economic data has been mixed, with the economy growing at a sluggish 0.7 per cent annual pace in the first quarter as consumer spending almost stalled.
A decline in US new vehicle sales for April, following a disappointing March is also prompting worries that the industry, which has seen a nearly uninterrupted boom since 2010, may be on a downward swing.
But a surge in business investment and the fastest wage growth in a decade suggest activity will regain momentum as the year progresses.
The weak US auto sales figures could make market participants wary of actively buying the dollar against the yen for now, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
“Concerns about geopolitical risks such as North Korea had weighed on the dollar against the yen recently... But the focus is shifting to whether the (strength) of US economic fundamentals is for real,” he said.
“There is more data coming up including the jobs data, so those need to be watched closely,” Okagawa said, referring to the US non-farm payrolls report due on Friday.
The dollar was little changed at 111.995 yen on Wednesday.
It touched a six-week high on Tuesday but fell back to close 0.2 per cent higher.
The dollar index which tracks the greenback against a basket of trade-weighted peers, rose 0.1 per cent to 99.055.
The euro was marginally lower at $1.0923, following Tuesday’s 0.3 per cent gain.
Sterling weakened almost 0.4 per cent to $1.2895, surrendering most of Tuesday’s 0.4 per cent gain.
Euro zone unemployment remained at 9.5 per cent in March, the lowest level since April 2009, while manufacturing growth for April was at or near six-year highs in France and Germany, and rose to a three-year peak in the UK, data showed overnight.
That followed figures from Asian economies including Indonesia, Malaysia, India and Japan that all showed faster manufacturing growth in April.
While growth in China eased more than expected, the world’s second-largest economy nevertheless avoided a sharp loss of momentum.
Crude oil prices bounced back on Wednesday as a decline in US inventories underpinned the market, although a dip in compliance with Opec efforts to reduce output capped gains. US West Texas Intermediate crude rose 48 cents, or 1 per cent, to $48.14 a barrel by 0030 GMT.
On Tuesday, the market slid 2.4 per cent to its lowest close since March 21.
Benchmark Brent futures gained 59 cents, or 1.2 per cent to $51.05 a barrel.
US crude stocks fell last week, and both gasoline and distillate inventories also dropped, data from industry group the American Petroleum Institute showed on Tuesday.
Crude inventories fell by 4.2 million barrels in the week ended April 28 to 528.3 million barrels, compared with analyst expectations for a decrease of 2.3 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub fell by 215,000 barrels, API said.
The US government will release its inventory data on Wednesday at 10:30 am (1430 GMT)
“The supply of crude oil continues to decline. This is evident in both spot and forward supply data,” commodities brokerage Marex Spectron said in a note. — Reuters
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