Most Asian shares rose on Wednesday, extending a rally driven by upbeat Chinese and U.S. economic data, but the dollar, U.S. 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 U.S. 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 U.S. 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 .MIAPJ0000PUS was 0.5% higher. Australian shares .AXJO gained 0.74% and Taiwan’s tech-heavy board .TWII added 1.16%.
However, Chinese blue-chips .CSI300 pulled back 0.1% 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 .N225 erased early losses and was last up 0.14%.
The Fed meeting comes as U.S. 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 U.S. 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% on Wednesday after U.S. stocks ended off their session highs, with the Dow industrials closing little changed.
The S&P 500 .SPX gained 0.5% while the tech-heavy Nasdaq Composite .IXIC rose 1.2%.
U.S. 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% 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%, 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 U.S. offshore oil and gas production and as U.S. stockpiles fell.
Global benchmark Brent crude rose 0.79% to $40.85 per barrel and U.S. West Texas Intermediate crude ticked up 1.02% to $38.67 a barrel.