Asian shares rise as Fed cheer offsets trade, UK angst

Japan's Nikkei stock index climbed 0.11 per cent and US stock futures rose 0.06 per cent. — Reuters pic
Japan's Nikkei stock index climbed 0.11 per cent and US stock futures rose 0.06 per cent. — Reuters pic

TOKYO, Dec 12 ― Asian stocks edged higher today after the Federal Reserve signalled rate settings were likely to remain accommodative but the imminent UK election and a deadline for Sino-US trade talks kept investors cautious.

Capping broader gains was a fall in oil prices after data showed an unexpected increase in US crude inventories, which hit some energy stocks in the region.

The Fed kept interest rates unchanged, as expected, at its policy meeting yesterday but indicated interest rates would remain on hold, which nudged Wall Street stocks higher.

That helped MSCI's broadest index of Asia-Pacific shares outside Japan to rise 0.2 per cent. Japan's Nikkei stock index climbed 0.11 per cent and US stock futures rose 0.06 per cent. Australian shares were down 0.29 per cent, however, weighed by the energy sector after the fall in oil prices.

“The Fed's accommodative stance does support equities, but the chance of a disruptive election outcome in Britain is very real,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“You also have the US-China trade problem. We're likely to see subdued trading and some investors make lock in profits as the day progresses.”

The S&P 500 rose 0.29 per cent yesterday after the Fed's rate decision, which included enough dovish tones to cheer markets.

Traders are bracing for a series of make-or-break events over the next few days that have the potential to cause huge swings in financial markets for months to come.

Sterling traded near the highest in more than two years versus the euro and close to a eight-month high versus the dollar before voting begins in an election that will determine whether Britain exits the European Union in an orderly fashion.

Polls show the Conservatives' lead shrinking ahead of an election starting later today, which could jeopardise chances of a smooth Brexit.

Exit polls for Britain's election will begin around 2200 GMT today after voting closes, then official results will begin to trickle in.

UK Prime Minister Boris Johnson's ruling Conservative Party is running on a pledge to enact a swift split from the EU, ending more than three years of uncertainty.

Traders say a hung parliament or a victory for the main opposition Labour Party could cause huge disruptions because Labour is promising another referendum on membership of the bloc.

Against the euro, sterling was little changed at 84.36 pence, close to the highest since May 2017. The pound traded at US$1.3200 (RM5.4838), just shy of its highest since March.

In trade war news, US President Donald Trump is expected to meet Thursday with top advisers to discuss tariffs on nearly US$160 billion of Chinese consumer goods that are scheduled to take effect on December 15, three sources told Reuters.

Trump is expected to go ahead with the tariffs, a separate source told Reuters, which could scuttle efforts to end a 17-month long trade war between the world's two-largest economies.

The dollar index against a basket of six major currencies traded at 97.413. Yesterday it fell to a four-month low after Powell it would take a significant pick-up in inflation to cause the Fed to raise rates.

Treasury yields initially fell in reaction to Powell's comments, but they rebounded slightly in Asia. The yield on benchmark 10-year Treasury notes rose to 1.7965 per cent.

US crude futures rose 0.26 per cent to US$58.91 a barrel in Asia. A report by Opec released on Wednesday suggested that oil markets are tighter than previously thought.

Traders are also focused on state oil company Saudi Aramco , whose shares surged the maximum permitted 10 per cent above their IPO price on their Riyadh stock market debut yesterday, making it the world's most valuable listed company. ― Reuters

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