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Markets Update am

Asia stocks slip with central banks in focus, oil holds gains

  • Aussie tumbles; Apple cored

Asian stocks were mostly lower on Wednesday, as investors stayed cautious ahead of U.S. and Japanese central bank policy decisions, while crude oil prices hovered near 2016 highs.

The Australian dollar is tumbling following shock news of deflation Down Under, though oil continues its rally, hitting a four month high.

Wall Street will be pressured by a mooted sharp sell-off in Apple shares, after the iPad maker’s earnings disappointed the market. Apple’s Asian suppliers were dented, dragging down stock markets in tech-heavy South Korea, Taiwan and Japan.

The Nikkei 225 shed 0.4 per cent, also hurt by a strengthening yen, up 0.1 per cent to ¥111.18 ahead of Thursday’s monetary policy decision from the Bank of Japan.

Some analysts think the BoJ may push interest rates further into negative territory and juice up its asset purchasing stimulus programme in order to tackle slow economic growth and deflationary pressures.

This ultra-loose strategy — which includes the buying of fixed income assets — has helped force bond prices higher and yields lower. Ten-year Japanese government bond yields are minus 0.06 per cent.

Treasuries are slipping two basis points on the day to 1.91 per cent and the dollar index (DXY), which measures the buck against a basket of its peers, is off 0.2 per cent at 94.42. German Bunds are down 1bp to 0.30 per cent.

The DXY in recent weeks has flirted with its lowest level since August after the Federal Reserve was seen adopting a more dovish stance on interest rates.

The main event tonight is the FOMC decision and the question of how much they acknowledge the clearly better global environment,” wrote Sam Tuck, senior FX strategist at ANZ.

“With volatility back to more normal levels, equities again pushing their highs, (European Central Bank President Mario) Draghi indicating they need time to assess existing policy, and Chinese and Asian data showing some signs of picking up, the door is open for the Fed to again signal gradual normalization.”

INFLATION DATA HITS AUSSIE

A big mover in the Asian currency market was the Australian dollar, which dropped sharply after first quarter inflation data showed prices fell for the first time since 2009, and core inflation rose more slowly than expected.

“The underlying rate of inflation has slowed considerably and Australia’s CPI rates are finally starting to look more like its developed market peers. This won’t sway the RBA to lower the cash rate next Tuesday, but it will keep their easing bias in play for a while,” said Jasmin Argyrou, Aberdeen Asset Management senior investment manager in Sydney.

The Aussie, which hit a 10-month high of $0.7836 last week on the back of higher commodity prices, was down 1.5 percent at $0.7633

The U.S. dollar wobbled against the euro after being hit by Tuesday’s weaker than expected U.S. durable goods orders data. The common currency was steady at $1.1297EUR= after advancing 0.3 percent overnight.

Sterling was near a 12-week high of $1.4640 probed overnight as investors bet more heavily that Britons would vote in a June referendum to stay in the European Union, following an intervention from U.S. President Barack Obama on the side of the “In” campaign.

In energy, the price of Brent crude is up 1.3 per cent to $46.32 a barrel, taking its rally off January’s 12-year low to 71 per cent amid hopes that recent low prices have crimped production. Gold is up $2 to $1,245 an ounce.

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