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Asian stocks cheer upbeat data but temper appetite ahead of Fed

Reuters/Shanghai
Filed on September 16, 2020

(Reuters file)

In the currency market, the yen touched a two-week high of 105.26 per dollar.

Most Asian shares rose on Wednesday, extending a rally driven by upbeat Chinese and US economic data, but the dollar, US yields and gold held steady as investors awaited the Federal Reserve's view on the economy at its policy meeting.

Following robust industrial output and retail sales data from China and higher US factory production investors are focusing on the Fed's policy statement due Wednesday, the first since Chair Jerome Powell announced an increased tolerance for higher inflation.

"The risk is if we see no new developments since his Jackson Hole shoutout, this could have near-term pressure on yields ticking up, gold and precious metals complex lower, dollar higher and general risk-off in US equities," said Kay Van-Petersen, global macro strategist at Saxo Capital Markets.

"If we do get a surprise on the accommodative side - we've gotten this a few times from smooth Jay (Powell) - then we could get the inverse of all that, including the next big structural break higher in gold."

The Fed is due to announce its decision at 1800 GMT Wednesday, followed by a news conference from Powell.

MSCI's broadest index of Asia-Pacific shares outside Japan was 0.5 per cent higher. Australian shares gained 0.74 per cent and Taiwan's tech-heavy board added 1.16 per cent.

However, Chinese blue-chips pulled back 0.1 per cent as investors booked profits after three days of gains.

Investors also await Japan's parliamentary approval of Yoshihide Suga as the country's next prime minister on Wednesday. Suga will then form a new cabinet.

Japan's Nikkei erased early losses and was last up 0.14 per cent.

The Fed meeting comes as US lawmakers remain at an impasse over a new stimulus package amid lingering concerns about the recovery of the world's largest economy from the coronavirus pandemic.

"There is some expectation that with the US Congress unwilling/unable to agree to a new fiscal package, monetary policy may need to step in to fill the void," NAB analyst Tapas Strickland said in a note. "Accordingly markets will be focused on any changes to forward guidance and to any balance sheet adjustments."

The Bank of Japan and the Bank of England announce their respective policy decisions on Thursday.

E-mini futures for the S&P 500 were up 0.1 per cent on Wednesday after US stocks ended off their session highs, with the Dow industrials closing little changed.

The S&P 500 gained 0.5 per cent while the tech-heavy Nasdaq Composite rose 1.2 per cent.

US retail sales figures from August will also be in focus on Wednesday.

Separately, the World Trade Organization found on Tuesday that the United States had breached global trading rules by imposing multi-billion dollar tariffs in President Donald Trump's trade war with China, a ruling that drew anger from Washington.

In the currency market, the yen touched a two-week high of 105.26 per dollar as traders bet that the Fed acting on a more accommodative approach to inflation could weaken the greenback.

The euro was down less than 0.1 per cent to buy $1.1838, while the dollar index, which tracks the greenback against a basket of six major rivals, was treading water at 93.092.

The yield on benchmark 10-year Treasury notes was unchanged from Tuesday's close at 0.6789 per cent, and spot gold held steady at $1,955.48 per ounce.

In contrast to the muted activity elsewhere, oil prices jumped as a hurricane disrupted US offshore oil and gas production and as US stockpiles fell.

Global benchmark Brent crude rose 0.79 per cent to $40.85 per barrel and US West Texas Intermediate crude ticked up 1.02 per cent to $38.67 a barrel.



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