Asian shares rise as investors eye Fed meeting for hints on plans to taper bond buying

Japan's Nikkei rose 0.89 per cent in early trading, ahead of the US Federal Open Market Committee meeting starting on Tuesday. PHOTO: AFP

HONG KONG (REUTERS) - Asian shares rose early on Tuesday (June 15), tracking Wall Street higher, though investors looked to a much-anticipated Federal Reserve policy meeting to see if the central bank would signal any change to the United States monetary policy outlook.

Japan's Nikkei rose 0.89 per cent in early trading and MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.23 per cent.

An early driver was Australian shares, which rose 1.03 per cent, though Chinese blue chips dropped 0.16 per cent and Hong Kong fell 0.21 per cent. All three resumed trading after being shut on Monday for a public holiday.

Singapore's Straits Times Index was up 0.6 per cent at 10.19am local time.

Overnight the S&P 500 and Nasdaq closed at record highs, helped by tech names, though the Dow Jones Industrial Average fell 0.25 per cent.

US stock futures, the S&P 500 e-minis, were also up 0.11 per cent.

"We are still getting markets responding positively to the lower volatility in the bond markets and lower yields, and a sense that inflation will be reasonably temporary and the Fed won't have to slam the breaks on," said Mr Kyle Rodda, market analyst at brokerage IG Australia.

"I suspect in the next 24-48 hours we'll see a lot of chop, first on the upside, then a little correction as the market positions itself, and then we're off to the races, if we get the green light from the Fed Thursday morning," said Mr Rodda.

Traders will look closely at any hints from the meeting's final statement about whether and when the Fed plans to taper its bond buying programme, amid concerns from some quarters about inflation as the US economy bounces back from the Covid-19 pandemic fallout. The two-day Federal Open Market Committee (FOMC) meeting starts on Tuesday.

Nearly 60 per cent of economists in a Reuters poll expect a taper announcement will come in the next quarter, despite a patchy recovery in the job market.

"Whilst no immediate changes in monetary policy are anticipated, an increase in the share of FOMC members who think rates will need to increase in 2023 is expected," analysts at ANZ wrote in a note to clients.

"If three more members pencil in rate rises for 2023, that would tip the majority in favour of moving rates relatively soon," they said

Currency markets were quiet ahead of the meeting, with the dollar index, which measures the greenback against a basket of six currencies, broadly flat at 90.502 in early Asia trading.

Benchmark 10-year yields were 1.4872 per cent, little changed from Monday, when they rebounded from last Friday's three-month low.

As for commodities, US crude ticked up 0.55 per cent to US$71.27 a barrel, and Brent crude was at US$73.24 per barrel, having touched on Monday US$73.64 a barrel, its highest since April 2019.

Spot gold was down slightly at US$1,862.21 per ounce.

Even Bitcoin was fairly quiet, fluctuating a little above US$40,000. It rose on Sunday and Monday after Mr Elon Musk said Tesla could resume accepting payment in the world's largest cryptocurrency at some point in the future.

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