Asia stocks edge up amid Fed lull

23 Aug, 2016 11:11 am

SYDNEY – Asia shares inched ahead while oil fell for a second session on Tuesday, as investors awaited guidance on whether the Federal Reserve will raise US interest rates this year.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.3 percent in slow trade. South Korea .KS11, Australia and Shanghai .SSEC all gained.

Japan’s Nikkei .N225 went the other way and eased 0.2 percent as the yen held firm on the dollar.

A survey of Japanese manufacturing activity showed signs of steadying in August as output rose for the first time in six months, but had little impact on stocks.

The IHS Markit/Nikkei Japan Flash PMI rose to 49.6 in August from a final 49.3 in July. More flash surveys are due from Europe and the United States later in the day. ECONG7

The whole world seems to have hushed ahead of comments from Fed Chair Janet Yellen at the central bank’s annual meeting in Jackson Hole on Friday. Investors still doubt the stars will align for a hike anytime soon, so a hawkish tone from Yellen would challenge that equanimity.

“Ever so slowly, the market does seem to be reluctantly acknowledging the chorus of senior Fed speakers who have suggested recently that a 2016 rate hike is still quite probable and September is ‘live’,” wrote analysts at ANZ in a note.

“But in reality, the response has been very muted.”

Indeed, US Treasuries actually rallied on Monday, with 10-year yields US10YT=RR at 1.54 percent after falling 4 basis points overnight.

Fed fund futures  imply around a 24 percent chance of an easing in September, rising to around 50 percent by December. A quarter-point hike is not fully priced until September 2017. –Reuters

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