Asian stocks hold central bank vigil, oil bounces

A pedestrian walks past an electronic stock board outside a securities firm in Tokyo, Japan, on Wednesday, Sept 14, 2016.
A pedestrian walks past an electronic stock board outside a securities firm in Tokyo, Japan, on Wednesday, Sept 14, 2016.PHOTO: BLOOMBERG

SYDNEY (REUTERS) - Caution gripped Asian shares on Monday (Sept 19) ahead of central bank meetings in the United States and Japan this week, while oil prices bounced on talk of an Opec deal on output and reports of fighting around Libyan oil ports.

Bombings in New York City and New Jersey and a stabbing at a Minnesota shopping mall added to a general air of risk aversion.

While US officials are investigating the attacks as potential "acts of terrorism," they stopped short of characterizing the motivation behind any of them until more evidence is uncovered.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat, while South Korea edged up 0.1 per cent. Liquidity was further sapped by a holiday in Japan.

EMini futures for the S&P 500 were trading around 0.25 per cent firmer. On Friday, the S&P 500 had eased 0.38 per cent and the Dow 0.49 per cent.

Financials led the losses on news authorities had proposed to fine Deutsche Bank US$14 billion sent its shares down 9.35 per cent. Goldman Sachs and JPMorgan both fell over 1 per cent.

Investors are counting down to the Federal Reserve's Open Market Committee meeting Sept 20-21, with chair Janet Yellen holding a news conference on Wednesday.

A surprisingly large rise in consumer price inflation reported on Friday seemed to add to the case for a US rate hike and pushed the US dollar higher.

Yet most recent consumer and industrial activity data has disappointed, leaving the market still pricing in only a 12 per cent probability of a rate rise this week, and 45 per cent for December.

Assuming no move on policy, the focus will be on the FOMC's forecasts for the funds rate, which this time extend to 2019.

"They may use the extension to lower their expectations for rates in 2017 and 2018, so that they end up with the same terminal level of rates but just take longer to get there," said Marshall Gittler, head of investment research at FXPRIMUS. "In other words, a slower, more gradual pace of tightening. In that case I would expect the dollar to weaken."

The Bank of Japan also meets on Wednesday and could well go in the opposite direction by easing policy, though conflicting reports on what it might do have created much uncertainty.

Sources have said the BoJ will consider making negative interest rates the centrepiece of future easing by shifting its prime policy target away from base money.

Any steps that markets consider to be less than aggressive would likely see the yen push higher and pressure the Nikkei .

Early on Monday the dollar was steady at 102.35 yen, having risen from around 101.75 on Friday in the wake of the firm US inflation figures.

The dollar index, which measures the greenback against a basket of six currencies, was a touch lower at 96.021.

The euro was just above a 10-day low at US$1.1155, while sterling was down near a one-month around US$1.3013 amid jitters over plans to leave the European Union.

British Prime Minister Theresa May signalled that she could be ready to launch formal Brexit negotiations in January or February, European Council President Donald Tusk has said.

Oil prices bounced on reported clashes at Libyan oil ports. Eastern Libyan forces said they had re-established control over two oil ports where an ousted faction launched a counter-attack on Sunday, briefly seizing one of the terminals.

Venezuelan President Nicolas Maduro was also reported saying a deal between OPEC and non-Opec members was "close" and he aimed to announce a deal to stabilise the market this month.

Brent crude rose 66 cents to US$46.43 a barrel, while US crude added 65 cents to US$43.68.