Asia: Stocks slip before Fed, BOJ; oil gains, kiwi strengthens

[WELLINGTON] Asian equities fell for a third day as investors shunned riskier assets ahead of central bank meetings in Tokyo and Washington this week. Crude oil resumed gains and precious metals advanced.

Raw-materials producers and banks led the retreat in regional equities, while futures on the Standard & Poor's 500 Index rose following a decline in the US benchmark on Monday. Gold and silver gained as haven assets drew demand before the Federal Reserve and Bank of Japan review monetary policy.

West Texas Intermediate crude clawed back some of the last session's 2.5 per cent loss, which stemmed from renewed concern over a global glut. Malaysia's ringgit weakened after a state-owned investment fund withheld an interest payment on its bonds, while New Zealand's dollar strengthened.

The Fed will conclude its meeting on Wednesday and while no change in interest rates is expected, Bank of America Corp sees scope for its comments to modestly boost the market's assessment of prospects for a hike.

The Bank of Japan's outcome will be announced a day later and most analysts predict governor Haruhiko Kuroda will announce another monetary stimulus boost amid Japan's near-zero inflation.

Quarterly earnings from Apple Inc on Tuesday will shed more light on the state of technology companies after results from Microsoft Corp and Alphabet Inc disappointed last week.

"Overall we're in wait-and-see mode," Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co in Tokyo, said by phone.

"It's easier for investors to lighten their positions so damage will be limited in case something unexpected happens in US and Japanese monetary policy."

Fed Funds futures reflect 20 per cent odds of a rate hike at the Fed's June meeting, and 34 per cent by July. 23 of 41 analysts surveyed by Bloomberg expect the BOJ to expand stimulus this week.

Stocks

The MSCI Asia Pacific Index lost 0.5 per cent as of 11:15 am Tokyo time. Benchmarks fell in Japan and Singapore, while Hong Kong's was little changed and Shanghai's advanced.

Camera maker Canon Inc and steel producer JFE Holdings Inc are among 27 members of Japan's Topix index that will report earnings on Tuesday.

South Korea's Kospi rose 0.3 per cent after data showed economic growth in the first quarter was in line with analysts' estimates. Gross domestic product expanded 0.4 per cent from the previous quarter, the Bank of Korea said Tuesday.

Futures on the Standard & Poor's 500 Index gained 0.2 per cent, while contracts on the UK's FTSE 100 Index climbed 0.5 per cent.

"Markets will remain myopically focused on Thursday's central bank extravaganza, with flows pushing us around until that point," Mark Smith, a senior economist in Wellington at ANZ Bank New Zealand Ltd, said in a client note.

"The Fed will choose its words carefully and has proven reasonably adept of late at keeping the market on an even keel despite tricky policy trade-offs."

Currencies

The yen strengthened 0.2 per cent to 110.99 per US dollar after appreciating 0.5 per cent in the last session, when it touched a three-week low of 111.91.

The ringgit led declines among Asian currencies, weakening 0.5 per cent. 1Malaysia Development Bhd said it didn't pay US$50 million of interest on a US$1.75 billion bond amid a dispute with Abu Dhabi's sovereign wealth fund on who should be making the payment.

New Zealand's dollar climbed 0.2 per cent after a group of academics, business people and economists put together by the New Zealand Institute of Economic Research and known as the central bank's shadow board, said the Reserve Bank of New Zealand should hold key rates at 2.25 per cent when it meets this week. 3 of 17 economists surveyed by Bloomberg forecast the RBNZ will lower borrowing costs on Thursday.

Commodities

WTI rose 1.2 per cent to US$43.15 a barrel, after falling on Monday for the first time in a week. US crude stockpiles probably expanded by 1.5 million barrels last week, according to a Bloomberg survey before Energy Information Administration data on Wednesday.

Oil markets are signaling that prices have bottomed, even as growth in demand is forecast to slow this year, according to a senior executive at Vitol Group, an energy trader.

"Oil is looking more and more solid above the $40 mark but it does seem momentum has slowed," Angus Nicholson, an analyst at IG Ltd in Melbourne, said by phone.

"There are still concerns about the oversupply and the market re-balancing is certainly not happening just yet."

BLOOMBERG