HONG KONG: Asian traders were subdued Wednesday despite a record close on Wall Street as they await the outcome of the Federal Reserve’s policy meeting, hoping for guidance on its monetary policy plans.
The central bank is all but certain to raise interest rates after its meeting ends later in the day but the main focus will be on chair Janet Yellen’s comments afterwards.
Some analysts suggest the rise could be the Fed’s last this year as traders fret over tepid inflation and the future of Donald Trump’s big-spending, tax-cutting agenda.
Hopes for those policies had fuelled expectations of a surge in prices — and a jump in borrowing costs — but the agenda is now in trouble as the tycoon faces political crises.
“With the rate hike now 96 percent priced in, focus will fall on the Fed’s forward guidance and importantly their views surrounding low inflation,” Stephen Innes, senior trader at OANDA, said in a note.
The dollar moved in a tight range against the yen in Asia ahead of the Fed announcement. Equity markets struggled despite a strong lead from Wall Street, where the Dow and S&P 500 ended at record highs.
Tokyo ended 0.1 percent lower, while Shanghai closed down 0.7 percent with dealers unimpressed by Chinese factory output data.
Chinese Insurance firms were among the big losers after the chairman of sector giant Anbang Insurance, which had sought a business deal with the family of US President Donald Trump’s son-in-law, stepped aside amid a report he had been detained by authorities.
Seoul was off 0.1 percent and Singapore gave up 0.2 percent. Taipei fell 0.6 percent.
However, Sydney climbed more than one percent and Hong Kong staged a late bounce to end up 0.1 percent.
The pound extended its gains after bouncing on news Tuesday that British consumer inflation rose to a near four-year high of 2.9 percent in June.
The data comes as the Bank of England ends its own policy meeting Thursday and will put pressure on the policy board to raise rates within its two percent target.
British inflation had held close to zero throughout 2015 but has surged since then as a weak Brexit-hit pound raises import costs.
The pound on Friday tumbled to a seven-week low at $1.2636 in the wake of Thursday’s election result that saw the ruling Conservatives lose their majority, days before the start of crucial talks on leaving the EU.
Oil prices sank around one percent after the American Petroleum Institute said US inventories rose last week, confounding forecasts of a drop. Attention is now on the release of government stockpiles data later Wednesday.
In early European trade London slipped 0.1 percent but Paris was up 0.4 percent and Frankfurt gained 0.2 percent.