Asian shares, US bond yields rise ahead of Fed rate decision
TOKYO – Asian shares followed Wall Street higher on Wednesday, albeit in thin volume, and short-term US bond yields held near 4 1/2-year highs as investors braced for the possibility of the first interest rate hike in the United States in almost a decade.
European markets are poised to follow suit, with financial spreadbetters expecting Britain’s FTSE 100 and France’s CAC 40 to open up 0.3-0.4 percent and Germany’s DAX 0.6 percent higher.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.4 percent, while Japan’s Nikkei gained 0.4 percent.
China shares reversed earlier gains to slip 0.1 percent, extending their 6 percent slide early in the week on underlying concerns about its slowing economy. Hong Kong’s Hang Seng index fared better, adding 1.1 percent.
Markets remained in a state of flux on the likelihood of a rate increase by the Fed at its two-day meeting starting later in the day, and US economic data published on Tuesday did little to either back, or douse, expectations of one.
“Sentiment is shifting on a 5-cent piece right now,” said Ben Le Brun, markets analyst at trading platform provider optionsXpress in Sydney.
“Although futures markets are pricing in a less than 30 percent chance of a rate hike on Thursday, the US dollar continues to strengthen, meaning that traders might be having an each-way bet on the outcome.”
US shares rose 1 percent overnight, in part helped by data showing healthy growth in consumer spending, although retail sales for August were slightly below market expectations.
Manufacturing remained soft, pressured by the impact of the strong dollar on exporters, slack economies oversees and lower oil prices.
US Treasuries’ yields jumped on Tuesday, with the policy-sensitive two-year yield rising about 8 basis points to 0.815 percent, its highest level since April 2011.
It last traded at 0.7822 percent.
The 10-year US notes’ yield stood at 2.2616 percent, having risen to a 1-1/2-month high of 2.294 percent on Tuesday.
“Those moves do not seem to be caused by any leaks on the Fed’s meeting,” Chotaro Morita, chief fixed income strategist at SMBC Nikko Securities, said in a report.
“They are probably triggered by nervousness among those who are taking positions” ahead of the Fed’s policy announcement.
The dollar index extended its rebound from Monday’s three-week low of 95.125 to stand at 95.464. But it is essentially staying within its well-worn range of the last few weeks.
The euro traded up 0.2 percent at $1.1289 while the dollar slipped 0.2 percent to 120.14 yen.
Emerging market currencies remained under pressure near multi-year lows on worries of capital outflows as US yields rise and on concerns over China’s slowdown.
Oil prices extended gains made on Tuesday, driven by rallying stocks, higher gasoline prices and a report showing strong stockpile draw compared with expectations for a build. US crude futures rose 0.7 percent to $44.88 per barrel while Brent futures were a little weaker in comparison, climbing 0.1 percent to $47.82. -Reuters