Talking Points

  • Wall Street offered Asian markets the prospect of a strong session
  • However only Japan’s Nikkei really took up that baton
  • Shares in Australia and China were under a bit of pressure for more local reasons

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Asian shares were mixed Tuesday as investors awaited news from index provider MSCI on whether Chinese shares will be included in its Emerging Markets Index- at the fourth attempt.

Nikkei 225 stocks took the baton from Wall Street. Both the Dow and the S&P 500 made record closing highs while the Nasdaq had its best session for a year. The Japanese benchmark was up 0.8% at the close, making another new high for 2017 itself. Australia’s ASX was lower, possibly thanks to Moody’s after-hours downgrade of major Australian lenders. Chinese stocks were down too, if not by a lot.

Overnight the US Dollar gained and Treasury yields rose. New York Federal Reserve President William Dudley said that inflation in the US should rise more quickly going forward- presumably letting the central bank carry on tightening policy. However Chicago’s Charles Evens said later that policy tightening should be slower because inflation so far has been soft, so investors can take their pick.

Local currencies had a quiet session, with the Australian Dollar steady on minutes from the Reserve Bank of Australia’s last monetary meeting which showed a lot of old ground being covered, but no new. The British Pound had a relaxed Asian Tuesday despite Monday’s formal start of Brexit talks. However, it may struggle later if Bank of England Governor Mark Carney uses his job’s famous “Mansion House Speech” to push back against heightened expectations of higher interest rates.

Gold prices inched up but remain near five-year lows, thanks to market suspicions that US rates may rise again even if they don’t do so this year. Crude oil prices lost nearly 50 cents as persistent oversupply worries continue to drag.

The rest of the global trading day offers that speech from Mark Carney and a few other central bank speakers but little in the way of data. The Swiss National Bank’s Chairman Thomas Jordan will speak in Bern, while the Boston Fed President Eric Rosengren and Dallas’ Robert Kaplan will also be heard from.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX