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Asian Stocks Fail To Hold Gains As Markets Look To Fed Decision

Asian Stocks Fail To Hold Gains As Markets Look To Fed Decision

David Cottle, Analyst


Talking Points:

  • Most Asian indexes failed to hold gains into the close
  • The State of the Union Speech was too short on detail for some
  • Australian inflation was the day’s major local data and it came in tepid

Asian stocks were lower Wednesday in a session which focused on US President Donald Trump’s first State of the Union Address.

It seems that markets found little concrete substance in a speech which largely attempted to paint in broad strokes. There was plentiful mention of increased infrastructure spending, but few specifics. There was really nothing much about the US Dollar, either, which served to fuel speculation that the Administration has little problem with its near-term weakness.

Still, focus now switches to the US Federal Reserve’s monetary policy decision which will come early Thursday Asian time. The central bank is not expected to raise interest rates this time around but there does seem to be some expectation that Chair Janet Yellen will use her final policy decision as a time to leave the door to a March increase open, and to sound a hawkish note on the economy.

In any case Asian stocks seemed to be abandoning early gains as the session wore on. The Nikkei 225 closed down 0.8% with shares in mainland China and Hong Kong also in the red as their days wound down. The ASX 200 managed to hang on into the finish, however.

The US Dollar was very marginally lower as markets digested the President’s words. Its Australian cousin took a hit earlier on tepid official inflation readings while the Japanese Yen was also initially pressured. Bank of Japan Deputy Governor Kikuo Iwata poured cold water on the idea that interest rates could rise with inflation still so low, even as the BoJ reportedly stepped up bond purchases to keep yields down, in accordance with its policy. China’s manufacturing sector expanded a little less than expected in January, according to official Purchasing Managers Index data but the familiar pattern of tangible-if-modest growth endured.

Gold prices were steady through the session but crude oil prices fell on news of another US inventory build.

Coming up on the data schedule are employment and retail-sales figures from Germany along with Eurozone consumer price data. There are plentiful numbers coming up from the other side of the Atlantic too. Official Gross Domestic Product figures from Canada are due, along with the US employment survey from Automated Data Processing. Mortgage applications will also be in focus, as will the Chicago Purchasing Managers Index, pending home sales and crude oil stock numbers from the Department of Energy.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.