Asia’s major stock indexes saw a largely unspectacular session on Wednesday with investors waiting on a keenly anticipated policy decision from the Federal Reserve later in the day.
But there was one significant outlier with Japan shares posting their biggest rise in three weeks, as investors scooped up stocks amid relief that the Bank of Japan (BoJ) had refrained from major changes to stimulus settings a day earlier.
The Nikkei share average surged 2.41%, or 742.80 points, to close at 31,601.65, while the broader Topix was ahead 2.53%, or 56.96 points, to 2,310.68.
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The BoJ on Tuesday further loosened its grip on long-term interest rates by tweaking its bond yield control policy again but, crucially, it kept its ultra-low interest rates steady.
An overnight strong finish on Wall Street and robust outlook for domestic corporates has also boosted risk appetite, strategists said.
Chinese stocks steadied, as caution partly offset gains following data pointing to a troubled recovery in the world’s second-largest economy.
And Beijing announced plans to establish a mechanism to resolve domestic debt risks and manage government debt, after the country’s top leaders held their twice-a-decade fiscal policy meeting on October 30 and 31.
On the geopolitical level, tensions between Washington and Beijing have shown signs of abating. US President Joe Biden and his Chinese counterpart Xi Jinping aim to have a “constructive conversation” on the sidelines of the Asia-Pacific Economic Cooperation Forum in San Francisco in mid-November, the White House said.
China’s blue-chip CSI 300 index was flat, and the Shanghai Composite Index rose just 0.14%, or 4.31 points, to 3,023.08. The Shenzhen Composite Index on China’s second exchange fell 0.13%, or 2.36 points, to 1,872.15.
Hong Kong stocks traded within a narrow range as traders maintained a cautious stance ahead of the US Fed’s monetary policy decision scheduled for later in the day.
Shares of Chinese technology companies listed in the territory fell by 0.3%, while the Hang Seng Index edged down 0.06%, or 10.70 points, to 17,101.78.
Spotlight on Fed Rate Decision
Elsewhere across the region, in earlier trade, Sydney, Seoul, Singapore and Wellington rose but Mumbai was down. MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.14% higher but the index has clocked three straight months of losses.
European stocks looked set to open on a surer footing, with the Eurostoxx 50 futures up 0.34%, German DAX futures up 0.37% and FTSE futures 0.27% higher.
The spotlight on Wednesday will firmly be on the Federal Reserve’s policy decision, with the central bank widely expected to hold rates steady.
Comments from Fed Chair Jerome Powell will be scrutinised to gauge where interest rates are headed and how long they will stay higher.
Markets are pricing in a 29% chance of a 25 basis point hike in December and a 35% chance of a 25 bps hike in January, the CME FedWatch tool showed.
Treasury yields remained elevated, with the yield on 10-year Treasury notes up 4.5 basis points to 4.920%. The yield on the 30-year Treasury bond was up 5.4 basis points to 5.078%.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 1.2 basis points at 5.083%.
Japan Currency Warnings
In the currency markets, the BoJ’s decision to tweak its bond yield control policy, further loosening its grip on long-term interest rates, drove a broad slide in the yen.
It tumbled to a one-year low against the dollar and touched a 15-year low against the euro as investors had expected a bigger BoJ step towards ending years of massive monetary stimulus.
The sharp drop in the yen prompted a fresh and sterner warning from Japan’s top currency diplomat Masato Kanda that authorities were on standby to respond to recent “one-sided, sharp” moves in the currency.
Against a basket of currencies, the dollar was up 0.075% at 106.75. Sterling was last at $1.2135, down 0.16% on the day.
Oil prices inched higher ahead of the Fed decision, with the market keeping a close eye on the latest developments in the Israel-Hamas conflict.
US crude rose 0.07% to $81.08 per barrel and Brent was at $85.20, up 0.21% on the day.
Key figures
Tokyo – Nikkei 225 > UP 2.41% at 31,601.65 (close)
Hong Kong – Hang Seng Index < DOWN 0.06% at 17,101.78 (close)
Shanghai – Composite > UP 0.14% at 3,023.08 (close)
London – FTSE 100 > UP 0.15% at 7,333.06 (0934 GMT)
New York – Dow > UP 0.38% at 33,052.87 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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