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Asian dealers on edge as Fed meeting approaches

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[HONG KONG] Asian markets mostly fell Tuesday as attention turns to this week's much-anticipated Federal Reserve meeting, while analysts said the recent Trump-fuelled rally may have been overblown.

Global stocks have surged since Donald Trump was elected US president as investors bet his plans for huge infrastructure spending and tax cuts will kickstart the world's top economy.

However, with the Fed meeting looming trading floors have quietened, waiting to see if the central bank provides any forward guidance on its plans for 2017 after an expected interest rate hike.

"With a rate hike at this week's (meeting) fully priced and given the strong rally in the dollar, we are likely seeing some paring of positions heading into the rate decision," Khoon Goh, head of regional research at Australia & New Zealand Banking Group in Singapore, told Bloomberg News.

Market voices on:

"Market participants are also reassessing whether the Trump rally has gotten a bit ahead of itself."

Hong Kong slipped 0.2 per cent in the afternoon while Shanghai ended 0.1 per cent up, though gains were limited despite a better-than-expected read on Chinese factory output and retail sales.

"The figures are good but the market sentiment remains cautious after a big drop yesterday," Linus Yip, a Hong Kong-based strategist at First Shanghai Securities, said.

Shanghai sank 2.5 per cent on Monday.

Seoul put on 0.4 per cent but Sydney lost 0.3 per cent while Singapore, Wellington and Manila were also all down.

The anaemic performance came despite a record close for the Dow on Wall Street.

However, Tokyo chalked up another gain, adding 0.5 per cent to close at its highest level since mid-December 2015.

On foreign exchanges the US dollar edged back against most high-yielding currencies having tapped multi-month highs against most over the past few weeks.

The Australian dollar, South Korea's won and Indonesia's rupiah were up around 0.2 per cent.

The oil-dependent Malaysian ringgit was flat after surging more than two per cent in early trade following Monday's jump in crude prices after the weekend agreement by non-Opec members to slash output.

Crude prices edged down in Asian trade Tuesday and Jeffrey Halley, senior market analyst at Oanda, said it would likely struggle to break further up after Monday's more than two percent gains.

"Oil speculators will need a continual stream of good news to maintain oil's rally at these levels, as they run into a solid wall of producer hedging (selling) in the futures market," he said.

"With US shale dusting off more rigs by the day, at these levels, expect this producer hedging to increase as oil grinds higher."