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Asia: Markets track New York rally ahead of next Fed meeting

[HONG KONG] Asian markets posted healthy gains on Monday following another record finish on Wall Street, while the focus turns to the Federal Reserve's next policy meeting later in the week.

Investors will be keeping a close watch on the US central bank as policymakers have to deal with the fallout from hurricanes Harvey and Irma, which hammered the country and are expected to hit economic growth.

While it is tipped to keep borrowing costs on hold, the bank's plans for cutting back crisis-era bond-buying stimulus and any signals for the future of interest rates will be pored over.

However, analysts were unsure about any further increases this year with inflation remaining subdued - apart from a bigger-than-expected jump in August - and other indicators still soft.

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Despite the likely move to tightening, stock markets remain buoyant and on Friday the Dow and S&P 500 each closed at all-time highs.

In Asia on Monday Hong Kong rose one per cent, Shanghai 0.5 per cent higher and Sydney rallying 0.6 per cent. Singapore added more than one percent, with Wellington 0.2 per cent higher and Taipei climbing 0.4 per cent.

Japanese markets are closed for a public holiday.

"Ultimately draining the economy of cheap money can't be viewed as a positive for markets accustomed to feeding off central bank largess. Why investors are so complacent is a mystery, but perhaps the reality check will set in midweek," said Stephen Innes, head of Asia-Pacific trading at OANDA.

POUND STRONGER

While the Fed mulls its next move the pound continues to shine against the dollar after the Bank of England last week indicated it will likely tighten monetary policy itself very soon.

After a big increase in inflation, the bank's governor Mark Carney said Thursday the chances of a hike had increased, followed on Friday by another board member signalling a move in "the coming months".

The remarks come as central banks shift from their easy-money policies with the world economy slowly improving, with the European Central Bank also set to wind in its own stimulus.

The pound was holding above US$1.36 and is sitting around its highest levels since Britain voted to leave the European Union in June last year.

Fears over North Korea receded soon after Friday's second missile test in a month. While the launch over Japan revived geopolitical worries - also coming soon after its provocative nuclear test - analysts said investors were calm for now.

"With the latest missile test we really didn't see much of a market footprint at all," Todd Elmer, Citigroup's head of G10 forex strategy for Asia ex-Japan, told Bloomberg Television.

"What that signals is that investors are not inclined to extrapolate that provocation into any major flareup in geopolitical tension."

AFP

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