Stocks

Asian shares ease, dollar nears 4-month high

Reuters SINGAPORE | Updated on May 02, 2018 Published on May 02, 2018

On Wall Street, the S&P 500 gained 0.25 per cent. File Photo   -  Reuters

Eyes on Fed's view of economy, inflation outlook

Asian equities eased on Wednesday, while the dollar traded near a four-month high as investors await the Federal Reserve's upcoming policy statement for clues on the future pace of U.S. monetary tightening. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 per cent, while Japan's Nikkei shed 0.2 per cent.

Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore, said that in addition to focusing on the Fed's policy statement equity investors may be turning cautious on the outlook for corporate profits, given potential cost pressures from recent rises in oil prices. Market participants may be starting to wonder that “perhaps this is as good as it's going to get,” Innes said, referring to corporate profits.

On Wall Street, the S&P 500 gained 0.25 per cent on Tuesday, helped by optimism over US trade negotiations. Apple's shares rose about 4 per cent after the closing bell. The company beat revenue and profit expectations in its March quarter, with its shares ending the regular session up 2.3 per cent. On Tuesday, the Dow Jones Industrial Average fell 0.27 percent while the Nasdaq Composite rose 0.9 per cent.

Currency market

The dollar's index against a basket of six major currencies traded near a four-month high set on Tuesday, with the dollar having surged into positive territory for 2018 ahead of the US Federal Reserve's policy decision on Wednesday.

The Fed is seen set to hold interest rates steady this week but will likely encourage expectations that it will lift borrowing costs in June on the back of rising inflation and low unemployment. The central bank is due to announce its decision at 2 pm EDT (1800 GMT) on Wednesday.

The dollar index fell 0.1 per cent to 92.379. It had risen on Tuesday to a peak near 92.570, its strongest level in nearly four months. The dollar was underpinned by the outlook for a strong US economy amid signs of slowdown elsewhere, especially in Europe.

The euro zone's economic momentum has been faltering and that seems to have prompted market players to trim their long positions in the euro, said Hirofumi Suzuki, an economist for Sumitomo Mitsui Banking Corporation in Singapore. Against this backdrop, the dollar-buying trend will probably persist for a while, Suzuki added.

The euro edged up 0.1 per cent to $1.2004. On Tuesday, the common currency had touched a low of $1.1981, its weakest level since Jan. 11. Against the yen, the dollar struck its highest level in nearly three months at 109.92 yen in early Asian trade. It later pulled back to 109.73 yen, down 0.1 per cent.

The benchmark US 10-year Treasury yield was steady on the day at 2.978 per cent. Last week, the US 10-year bond yield, the benchmark for global borrowing costs, had set a four-year high of 3.035 per cent as bond prices fell on worries about the growing supply of government debt and inflationary pressures from rising oil prices.

The US Treasury is scheduled to announce its findings from a refunding survey on Wednesday, with analysts projecting an increase in auction sizes, or new issuance at different points on the yield curve.

Commodities

Oil prices were stable on Wednesday, supported by concerns that the United States may re-impose sanctions on major exporter Iran, although soaring US supplies capped gains. Brent crude oil futures edged up 0.1 per cent to $73.21 a barrel. Last week, Brent crude had hit a three-year high of $75.47.

Published on May 02, 2018
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