Fed decision, dollar movements, oil demand concerns

Pedestrians are reflected in a window as they walk past an electronic notice board at the ASX Ltd clearinghouse. in Sydney, Australia on Thursday, February 14, 2019.

David Moiré | Bloomberg | Getty Images

SINGAPORE — Asia-Pacific markets traded mixed on Wednesday as investors await the outcome of the U.S. Federal Reserve’s two-day policy meeting later in the day.

Australian stocks pared some of their earlier losses as the ASX 200 closed down 0.47% at 6,795.20. The energy and materials sub-indices fell 1.19% and 1.46%, respectively, as oil and mining stocks declined overall. Major miners Rio Tinto and BHP closed down 0.95% and 1.64% respectively.

The Nikkei 225 in Japan ended almost flat at 29,914.33 while the Topix index rose 0.13% to 1,984.03. The South Korean Kospi slipped 0.64% to 3,047.50.

Stocks from the Chinese mainland were mixed: the Shanghai composite was almost flat at 3,445.55, but the Shenzhen component rose 1.22% to 13,809.77. Elsewhere, Hong Kong’s Hang Seng index retraced earlier gains to trade almost flat by late afternoon.

Indian stocks also struggled to gain, but Singapore’s Straits Times Index edged higher in afternoon trading.

This followed an overnight session where the Dow Jones Industrial Average lost nearly 130 points, snapping a seven-day winning streak.

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

She explained in a morning note that US bond yields and the dollar could jump if the Fed’s post-meeting statement and remarks by Chairman Jerome Powell are not deemed dovish enough. “We don’t expect the FOMC to worry or even note rising bond yields in its post-meeting statement. Higher bond yields are not a constraint to the US economic recovery,” he said. she writes.

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

Currencies and Oil

In the foreign exchange market, the The US Dollar traded almost flat at 91.860 against a basket of its peers, falling from a previous level at 91.968. The index has remained relatively limited this week as it again attempts to break the 92 level.

The Japanese yen changed hands at 109.14 to the dollar, strengthening from levels near 109.2 hit earlier in the session. The Australian dollar slipped 0.14% to $0.7734.

Oil prices reversed the downward trend Wednesday afternoon during Asian trading hours and climbed higher. U.S. crude rose 0.73% to $65.27 a barrel while international benchmark Brent rose 0.63% to $68.82.

Overnight, prices fell as traders worried about a recovery in fuel demand after major European countries suspended the use of a crucial Covid-19 vaccine from the University of Oxford. and drugmaker AstraZeneca, implying that economic recovery from the pandemic-induced crisis could potentially be delayed.

Experts have warned that the suspension could have dire consequences.

“Crude oil fell as the market worries about the uneven global demand recovery,” analysts at ANZ Research said in a morning note. “Increasing demand has emerged in India and the United States in recent months, but Europe remains weak.”

“Concerns of a further drop in demand have grown as European health ministers suspend the rollout of the AstraZeneca vaccine due to health concerns,” the analysts added.

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Felix J. Dixon