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Asia-Pacific markets fall in cautious trade as Fed takes center-stage - Inside Financial Markets

Asia-Pacific markets fall in cautious trade as Fed takes center-stage

– Reuters

  • Asia-Pacific markets fell on Wednesday as investors wait for the outcome of the U.S. Federal Reserve’s two-day policy meeting later in the day.
  • Carol Kong from the Commonwealth Bank of Australia said that both U.S. bond yields and the dollar could jump if the Fed’s post-meeting statement and Chair Jerome Powell’s remarks are not deemed dovish enough.


Asia-Pacific markets fell on Wednesday as investors wait for the outcome of the U.S. Federal Reserve’s two-day policy meeting later in the day.

Australia shares inched lower, with the ASX 200 down 0.48% as most sectors fell. The energy and materials subindexes declined 1.36% and 1.35%, respectively as oil and mining stocks broadly struggled for gains. Major miners Rio Tinto and BHP were down 1.24% and 1.56%.

The Nikkei 225 in Japan traded flat while the Topix index was fractionally lower. South Korea’s Kospi fell 0.64%.

That follows an overnight session where the Dow Jones Industrial Average lost nearly 130 points, breaking a seven-day winning streak.

The Federal Open Market Committee’s policy meeting will take center stage, according to Carol Kong, a strategist at the Commonwealth Bank of Australia.

She explained in a morning note that both U.S. bond yields and the dollar could jump if the Fed’s post-meeting statement and Chair Jerome Powell’s remarks are not deemed dovish enough. “We do not expect the FOMC to be worried about or even note the lift in bond yields in their post‑meeting statement. Higher bond yields are not a constraint on the US economic recovery,” she wrote.

“We expect Chair Powell to note the FOMC has the tools to intervene if the bond market becomes disorderly or constrains the economic recovery,” Kong said, adding that the Australian bank also expects the Fed to upgrade its GDP and inflation forecasts due to vaccination rollout and fiscal stimulus.

TICKER COMPANY NAME PRICE CHANGE %CHANGE
.N225 Nikkei 225 Index NIKKEI 29914.33 -6.76 -0.02
.HSI Hang Seng Index HSI 29017.88 -9.81 -0.03
.AXJO S&P/ASX 200 ASX 200 6795.20 -31.90 -0.47
.SSEC Shanghai SHANGHAI 3448.23 1.49 0.04
.KS11 KOSPI Index KOSPI 3048.32 -18.85 -0.61
.FTFCNBCA CNBC 100 ASIA IDX CNBC 100 11166.07 -38.19 -0.34
Currencies and oil
In the currency market, the U.S dollar traded near flat at 91.881 against a basket of its peers. The index has stayed relatively rangebound this week as it attempts to break the 92.00 level again.

The Japanese yen changed hands at 109.09 per dollar, strengthening from levels near 109.20 reached in previous sessions. The Australian dollar traded fractionally lower at $0.7738.

Oil prices rose on Wednesday during Asian trading hours. U.S. crude was up 0.12% at $64.88 while Brent added 0.1% to $68.46.

Overnight, prices fell as traders worried about the recovery in fuel demand after major European countries suspended the use of a crucial Covid-19 vaccine from Oxford University and drugmaker AstraZeneca.

Experts have warned that the suspension could have far-reaching consequences.

“Crude oil fell as the market frets over the uneven global recovery in demand,” analysts at ANZ Research said in a morning note. “Growing demand has surfaced in India and the US in recent months, but Europe remains weak.”

“Concerns that demand could fall further have been rising as Europe’s health ministers suspend the rollout of AstraZeneca vaccine amid health concerns,” the analysts added.

Syed Zaki Hussain

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)