Asian Shares Slip As Investors Await Fed Meeting For Rate Clues
Asian shares slipped on Tuesday, hobbled by uncertainty as traders awaited a Federal Reserve meeting for clues on U.S. monetary policy, though sentiment was supported by record highs on Wall Street.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.2 percent after wobbling between positive and negative territory in early trading.
Futures suggested a lacklustre start to the European trading day, with the Eurostoxx 50 STXEc1 and FTSE futures FFIc1 both slightly lower, and DAX futures FDXc1 up 0.1 percent
On Wall Street on Monday, the Dow Jones Industrial Average .DJI closed at a record high for the fifth straight session, and the S&P 500 .SPX marked its second straight closing record high, as higher U.S. Treasury yields helped lift financial shares. [.N]
At a two-day meeting beginning later on Tuesday, the Fed is expected to take another step toward 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 .N225 ended 2 percent 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.