Asian Stocks Mostly Weaker As Investors Mull Fed Decision

Talking Points

• Asian stocks found the going tough, following Wall Street’s lead
• The US Dollar held up as investors continue to anticipate higher US interest rates next month
• Commodities had a poor day, notably iron ore and gold

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Most Asian stocks slipped Thursday taking their cues from a lackluster Wall Street session, while the US Dollar held up following the Federal Reserve’s monetary decision.

The Fed kept interest rates steady as expected, but it felt able to look past weak first-quarter economic growth at home. Its focus on the still-buoyant labor market left markets more or less convinced that two more rate increases are coming this year.

Local economic news was scant. Reserve Bank of Austalia Governor Philip Lowe gave the Australian Dollar a brief little boost by saying that ultra-low interest rates cannot last forever. However, he also said that rises were not imminent which effectively left investors where they were before he started. The Australian Dollar was however pressured by a lower-than-expected trade surplus in its home country. Commodity prices slide generally following falls in iron ore prices in China. They came in turn amid signs of tighter credit in the world’s second largest economy.

With the Nikkei 225 closed for the rest of the week for the Golden Week holiday, Asia was without its customary lead. However, mainland Chinese stocks erased earlier losses to trade near flat, while Australia and Hong Kong saw falls of about 0.4%. South Korea’s Kospi was the star, it managed to rise on corporate earnings whjch pleased the crowds.

The US Dollar stood at 112.76, hovering around its strongest level since mid-March. The Dollar index, which tracks the greenback against its most widely traded peers, rose about 0.1%.

Crude oil prices lost about 20 cents per barrel following Wednesday’s news of a lower than expected fall in US inventory. Gold prices were lower as the prospect of higher US rates continued to weigh on the yield-less metal.

The rest of the global session offers plentiful economic data, but little from the first tier with the exception of US jobless claims and durable-goods orders. We will hear from some top-line central bankers though, with the Bank of Canada’s Stephen Poloz speaking in Mexico and European Central Bank President Mario Draghi getting up in Lausanne.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX