Asian Markets Mixed as Traders Eye Oil, Fed
Despite massive movements in the oil markets in recent days, anticipation of the Federal Reserve’s policy announcement on Wednesday is keeping markets tempered and traders on guard. While analysts had long expected an interest rate cut of 25 basis points coming from the Fed this week, expectations that the Fed will hold rates steady are rising. According to CNBC, the markets are now assigning a 34 percent chance of the markets staying put, up from a zero percent expectation one month ago, and a 5.4 percent expectation a week ago.
One factor that has analysts concerned is the recent jump in oil prices caused by coordinated drone attacks on oilfields in Saudi Arabia. Oil prices, taken in conjunction with signs that core inflation is rising, may make a hard case for the Fed to cut rates. A recent spate of strong economic data may also be swaying the Fed as increases in business confidence and retail sales has made a case against the need for interest rate cuts.
On the flip side, U.S. President Donald Trump has continued his tendency towards pressuring the Fed, tweeting that the dollar is the strongest EVER (sic), and that the strong greenback is bad for exports, creating a case for interest rate hikes. To add salt to the wound, Trump continued his mudslinging campaign against the Fed, claiming that Chairman Jerome Powell and other Fed members “don’t have a clue.” The Fed has long shown that it pays no heed to presidential pressures, though the continued rhetoric remains unpleasant. The Fed announcement will be made on Wednesday afternoon EST.
Asian stocks were mixed on Tuesday afternoon, with Hong Kong’s Hang Seng Index down 1.01 percent as of 12:31 p.m. HK/SIN and both of China’s benchmark indexes over 1 percent lower. Japan’s Nikkei 225 was down a modest 0.02 percent while South Korea’s Kospi managed to eke out a 0.08 percent gain. Australia’s ASX 200 also rose, trading up 0.07 percent.
The currency markets were little moved on Tuesday, with the dollar index unchanged in the early afternoon in Asia. The dollar gained 0.07 percent against the yen to trade at 108.21, though it eased against the sterling, with the pound up 0.10 percent against the greenback to $1.2415. The euro also gained 0.10 percent against the dollar, to trade at $1.101.