Asian Stocks Mixed as Fed Policy Decision Looms

  • Stock Market News
Asian Stocks Mixed as Fed Policy Decision Looms
Credit: © Reuters.

By Gina Lee – Asia Pacific stocks were mostly down on Wednesday morning, with investors on tenterhooks as they await the latest U.S. Federal Reserve policy decision .

China’s Shanghai Composite inched down 0.01% by 9:14 PM ET (2:14 AM GMT) and the Shenzhen Component inched down 0.02%. Chinese data released earlier in the day showed that industrial production grew 3.8% year-on-year, while fixed asset investment grew 5.2% year-on-year, in November. Retail sales grew 3.9% year-on-year.

With authorities signaling upcoming support for the economy in 2022, all eyes are now on the People’s Bank of China’s loan operations for clues about the broader policy stance.

U.S.-China tensions are also up, with the U.S. considering tougher sanctions on Semiconductor Manufacturing International Corp. (SS: 688981 ), China’s largest chipmaker.

Hong Kong’s Hang Seng Index edged up 0.19%.

Japan’s Nikkei 225 inched down 0.02% and South Korea’s KOSPI was down 0.21%.

In Australia, the ASX 200 fell 0.63%.

The Fed hands down its policy decision later in the day, where it is expected to quicken the pace of asset tapering and open the door to potential interest rate hikes in 2022.

"At its heart, there is an implied assumption that all the Fed has to do is tap the fed funds brake a mere 150bps, and the economy will slow sufficiently to break the inflation cycle. Yet we have never had a cycle peak where real rates have not been above zero, which means the market's expected terminal rate is too low and possibly far too low,"  Deutsche Bank macro strategist Alan Ruskin told Reuters.

The European Central Bank and the Bank of England hand down their policy decisions on Thursday, followed by the Bank of Japan a day later.

Concerns about the omicron COVID-19 variant are also rising, with the global death toll topping 5 million, according to Johns Hopkins University data.

High inflation also remains a concern, with the flattening in the U.S. Treasury yield curve in 2021 indicative of a challenging economic period up ahead for some investors.

“We expect the markets to be volatile primarily because of the back and forth on the COVID-19 news” and “worries again about inflation,” RiverFront Investment Group senior market strategist Rebecca Felton told Bloomberg.

“High valuations and uneven data are probably what we are going to see for the next couple of months.”

On the data front, Tuesday’s data showed that the producer price index (PPI) grew 0.8% month-on-month and a record 9.2% year-on-year in November. The core PPI grew 0.7% month-on-month and 7.7% year-on-year .

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