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Asian stocks edged up on Wednesday as nervous investors counted down to Britain’s make-or-break European Union referendum, while Federal Reserve Chair Janet Yellen’s cautious tone on future rate hikes added to a subdued mood in markets.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2 per cent. Japan’s Nikkei extended losses to shed 1 per cent.
China’s CSI 300 index and the Shanghai Composite both advanced about 0.3 per cent, while Hong Kong’s Hang Seng slipped 0.1 per cent.
On Wall Street, US S&P 500 Index gained 0.27 per cent but was still below an 11-month high touched earlier this month.
Rebound in hiring
Fed chief Yellen had said on Tuesday the central bank’s ability to raise interest rates this year may hinge on a rebound in hiring that would convince policymakers the US economy isn’t faltering.
“A couple of months ago, Yellen was cautiously optimistic. Now she appears cautious while trying to be optimistic,” said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.
“Judging from her comments, a rate hike in July is completely off the table. It is questionable whether the Fed can have enough solid economic data to back up a rate hike even by September,” he said.
UK referendum on EU membership
Yellen’s more circumspect view on the future path of US rates comes as many investors remain on the sidelines ahead of Thursday’s British referendum on its European Union membership.
Polls in recent days showing rising momentum for the “Remain” camp helped boost risk appetite in global markets and have weighed on safe-haven assets such as German bonds and the Japanese yen since Friday.
But many investors are shunning trading as the vote remains too close to call, with an opinion poll published on Tuesday showing the “Remain” campaign’s lead had shrunk.
“We still have three polls on the UK referendum before the vote, and another shift back to Brexit will see risk appetite disappear in a jiffy,” Bernard Aw, market strategist at IG in Singapore, wrote in a note.
The British pound edged back to $1.4678 after climbing to as high as $1.4788 on Tuesday, its loftiest level since January 4.
The implied volatilities of the pound have also pushed up from lows on Tuesday, reflecting investor anxiety over a sharp fall in the currency in the event of Brexit.
The euro also slid to $1.12585 from this week's high of $1.1383 hit on Monday, turning negative on the week.
Draghi’s comments
European Central Bank President Mario Draghi said on Tuesday that Britain’s referendum was adding uncertainty to markets, and that the ECB was ready to act with all instruments if necessary.
The yen gained 0.3 per cent to 104.45 yen to the dollar following a dip on Tuesday, but remained not far from its 22-month high of 103.555 hit last week.
Crude oil, gold
The ebbing risk appetite didn’t help gold, though. Spot gold held steady at $1,268.77 an ounce, after touching a 1 1/2 week low of $1,264.10 on Tuesday.
On the other hand, oil prices extended their recovery after news of a larger-than-expected draw in US crude stockpiles.
Crude inventories fell 5.2 million barrels for the week ended June 17, the American Petroleum Institute (API) said. The trade group’s figures were triple the draw of 1.7 million barrels forecast by analysts in a Reuters poll.
Brent crude futures advanced 0.3 per cent to $50.77 per barrel, after rising high as $51.10 on Tuesday, its highest level since June 10.
US crude futures’ new benchmark August contract rose 0.4 per cent to $50.05.
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