Asian shares mixed ahead of central banks’ decisions

Sydney — Asian shares were mixed on Tuesday and currencies held tight ranges as nervous investors awaited several central bank meetings that could set the tone for risk appetite heading into next year.

MSCI’s gauge of Asia-Pacific shares outside Japan recovered early losses to be 0.8% higher at 1.28am GMT, with Japan’s Nikkei edging 0.2% lower and Australia’s S&P/ASX 200 down 0.6%.

The immediate focus was on the Reserve Bank of Australia'’s (RBA) meeting on Tuesday, with the Federal Reserve and Bank of England due to announce their policy decisions later in the week.

“All eyes for us are on the RBA,” said Adam Dawes, an investment adviser at Shaw and Partners in Sydney. “We expect the language will definitely start to change to be more accommodating for interest rate rises, or at least accommodating for pulling back quantitative easing.”

A drop of the RBA’s policy measure targeting ultra-low short-term rates would signal a change to the bank’s dovish stance and could be a preamble to the Fed’s meeting that markets expect will mark the start of its bond buying tapering.

Australian government bonds fell, with the 10-year benchmark yield five basis points higher at 1.973%, ahead of the RBA’s post-meeting announcement.

Chinese shares opened slightly lower, with local blue chips trading down 0.09%, though the Hong Kong benchmark was up 1.8%. South Korea’s Kospi index opened 1.50% higher.

Overnight, Wall Street advanced to record highs helped by gains for energy shares and Tesla.

The Dow Jones Industrial Average rose 0.26%, after eclipsing 36,000 points for the first time during intraday trading. The S&P 500 gained 0.18% while the Nasdaq Composite added 0.63%.

Currency moves were slight in morning trade with the dollar hovering below recent highs after posting its biggest daily rise in more than four months last Friday.

The yen was a fraction weaker at 114.11 per dollar and the greenback nursing a small overnight loss on the euro.

The Aussie, which had been steady through a week or so of wild selling in the domestic bond market, held at $0.7521, though volatility gauges point to a bumpy week.

With surging inflation looming over financial markets, the RBA leads a handful of central bank meetings set to define the near-term rates outlook.

Swaps pricing points to a better-than-even chance of the BoE hiking, while the RBA is expected to officially drop its yield curve control policy.

The Fed on Wednesday is expected to approve plans to scale back its $120bn monthly bond-buying programme put in place to support the economy, while investors will also focus on commentary about interest rates and how sustained the recent surge in inflation is.

“This Fed meeting is going to be a relatively big deal,” said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago. “We are expecting to hear the glide path for tapering the bond purchases.”

In commodities markets, a further 4% drop in Chinese coal prices on Tuesday pushed them 50% below last month’s record high.

Oil prices settled higher on Monday as expectations of strong demand and a belief that a key producer group will not turn on the spigots too fast helped reverse initial losses caused by the release of fuel reserves by No 1 world energy consumer China.

US crude was 0.2% higher at $84.25 per barrel and Brent was trading at $84.97, up 0.3%.

Spot gold was 0.1% lower to $1,789.99 an ounce. Bitcoin was 0.5% higher at $61,285.23.

Reuters