Asian stocks, dollar steady as Fed day arrives

Hong Kong - Markets were subdued during the Asian day as investors held fire before the Federal Reserve’s expected interest-rate hike later on Wednesday.

Crude and Japanese government bonds were outliers, with oil retreating on industry data showing US stockpiles rose and debt rallying as the central bank stepped up purchases.

About five stocks fell for every four that rose on a gauge of Asian equities. Australia’s benchmark index rallied to a four-month high as Tatts Group surged after a consortium bid for the betting and lottery company, while Japan’s Topix index halted a six-day advance.

A gauge of the greenback’s strength was little changed. The yield on Japanese 30-year bonds slid seven basis points. Oil declined 1.2% in New York.

The Fed’s path to tighter monetary policy has been delayed throughout 2016, as first instability in Chinese markets, then the shock votes for Brexit and Donald Trump, put policy makers on the back foot.

The US central bank is expected to boost borrowing costs just as the focus shifts back to governments, with fiscal easing at the hands of incoming US President Trump speculated to drive economic growth going forward.

After Wednesday, traders see a two-in-three chance of additional rate increases from the Fed by June, futures show.

"We go into the New Year with the market and the Fed on the same page in terms of where rates are going," said Chris Weston, chief markets strategist in Melbourne at IG.

"The recent upbeat sentiment - specifically in global equities - has not just been about what 'Trumponomics' could bring to inflation and growth, but we are genuinely seeing an improvement in the economic data flow in many developed markets."

Japan’s Tankan gauge of sentiment among large manufacturers came in as economists expected for the fourth quarter, rising to 10 from six in the previous period. India also reports on wholesale prices on Wednesday.

Stocks

The MSCI Asia Pacific Index added 0.1% as of 3:11 Tokyo time, with telecom shares rising most and material producers falling.

Australia’s S&P/ASX 200 Index climbed 0.7%; Tatts surged 8.5% after a consortium including Macquarie Group and KKR & Company offered as much as A$7.3bn ($5.5bn) for the company.

Hong Kong’s Hang Seng Index gained 0.5% as oil companies rallied. Topix dropped 0.2%; Shanghai Composite Index rose 0.2% and South Korea’s Kospi closed flat.

US index futures were little changed after the S&P 500 rose 0.7% to an all-time high and the Dow Average neared 20 000 points.  

Currencies

The yen was little changed at 115.17 per dollar after pulling back by 0.2% last session. The euro strengthened 0.2% at $1.0645.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, fluctuated after rising 0.1% on Tuesday and sinking 0.6% in the session before that.

Traders say the dollar should have a muted reaction to the Fed’s expected 25 basis-point hike, but may see more volatile price action in reaction to Chair Janet Yellen’s subsequent press conference.

Bonds

Japan’s 30-year government bond yield dropped to 0.74%. Yields on 10-year Australian notes fell three basis points to 2.79%, while similar maturity New Zealand bonds yielded 3.30%, down one basis point from Tuesday.

Treasuries due in a decade yielded 2.46%, down two basis points.

Commodities

West Texas Intermediate crude fell to $52.36 a barrel, following a four-day surge of more than 6%.

US inventories increased by 4.68 million barrels last week, the industry-funded American Petroleum Institute was said to report. Government data on Wednesday is forecast to show supplies fell.

Oil markets will swing into deficit in the first half of 2017 as producers curb supply, according to the International Energy Agency, earlier than its previous forecast.

Copper futures rose 0.2%, gaining for the first time in three days. Gold added 0.2% to $1 160.53 an ounce in the spot market.