Shares mixed, yen firm as worried markets wait on Fed

Shares mixed, yen firm as worried markets wait on Fed

Sydney (Reuters) : Asian share markets traded mixed on Monday as caution gripped investors in a week in which the Federal Reserve is likely to hike U.S. interest rates and perhaps signal that as many as three more lie in store for the rest of the year.

Japan’s Nikkei .N225 extended near the beginning losses to drop 0.9 percent as exporters were undermined by recent broad-based strength in the yen.

MSCI’s widest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.35 percent, but China .CSI300 managed to eke out a few gains.

The protected mood was not limited to Asia, with the June contract for E-Minis futures on the S&P 500 ESc1 down 0.3 percent and FTSE futures FFIc1 off 0.2 percent.

While Wall Street had bounced on Friday, the chief indices still ended lower for the week. The Dow .DJI lost 1.57 percent, the S&P .SPX 1.04 percent and the Nasdaq .IXIC 1.27 percent.

The decline was a bit surprising given figures from Bank of America Merrill Lynch showed a record $43.3 billion of inflows into equities last week, outpacing bond flows for the first time since 2013.

For the year so far, $9.8 billion has moved out into tech stocks and $7.3 billion into financials, while $41 billion has flowed into emerging markets and $31 billion into Japan.

Whether the cash continues to flow could depend on what the Fed decides on Wednesday. All 104 analysts polled by Reuters expected the Fed would raise rates to between 1.5 percent and 1.75 percent on Wednesday.

They were less certain on whether the “dot plot” forecasts of committee members will stay at three hikes this year or shift higher.

It will also be the first press conference for new Fed Chair Jerome Powell.

“Expected is a confident Fed Chair, both with respect to the economy’s strength and the Fed’s approach to policy,” said analysts at Westpac in a note.

“While growth forecasts and the distribution of rate projections are likely to drift up, the median Fed funds forecast should remain unchanged at three in 2018 and three more in 2019,” they added. “Gradual and timely are the operative words for policy.”

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