Tuesday 05.25 BST. Stock markets across Asia were again trading cautiously ahead of Wednesday’s highly-anticipated monetary policy decision by the Bank of Japan.
Trading volumes have tapered off as investors await the outcome of the meeting, as well as the Federal Reserve’s interest rates discussion later on Wednesday.
Japan’s broad Topix was up 0.7 per cent and the Nikkei 225 gained 0.1 per cent as the nation’s stock market opened after a long weekend.
A soft lead from Wall Street overnight did not help other Asian bourses. Australia’s S&P/ASX 200 was 0.2 per cent lower, resuming normal trade after a hardware function led to delays, interruptions and early closure.
Hong Kong’s Hang Seng was down 0.2 per cent, while on the mainland the Shanghai Composite lost 0.1 per cent and the tech-focused Shenzhen Composite was flat.
Investors were shifting their attention to the BoJ, which is also expected to release a review of its quantitative easing and negative interest rate efforts alongside its policy decision on Wednesday.
Unlike the Fed, where the decision is to either leave rates on hold or lift them, there is a wide range of expectations about what the BoJ might or might not do, which could lead to some messy trading after the meeting.
“Expectations are all over the place,” said Frederic Neumann, co-head of Asian economics at HSBC.
While suggestions include tapering asset purchases, holding rates, cutting rates deeper into negative territory, marginal tweaks and “another bazooka” — more aggressive policy action — Mr Neumann said that a sober perspective suggested that “the BoJ is at best going to tinker with its existing framework, not introduce a major overhaul”.
He highlighted that the recent run of economic data have not been overly bad, but price pressures remained soft and investors appeared “to have growing doubts about the BoJ’s ability to scale up, or even just to sustain, its current monetary easing”.
The yen was flat at ¥101.89 per dollar on Tuesday, having appreciated 0.4 per cent in the previous session.
The dollar index, a measure of the US currency against a basket of global peers, was flat at 95.88 on Tuesday, while US Treasuries were firmer in Asian trade as yields (which move in the opposite direction to price) edged lower. Japanese government bond yields were also lower, but Australian government bonds were weaker.
Gold, which is sensitive to monetary policy expectations, was up 0.2 per cent at $1,315.99 per ounce.
Markets are pricing in a 20 per cent that chance the Fed raises interest rates 25 basis points on Wednesday, according to Bloomberg calculations, down from 22 per cent a week ago.
Hopes that a deal among major oil producers to stabilise global output could be on the horizon buoyed oil prices overnight, but those gains evaporated in Asian trading. Brent crude, the international benchmark, was down 0.3 per cent at $45.81 a barrel while West Texas Intermediate eased 0.5 per cent to $43.08.
Among stock moves, Takata shares fell as much as 14.7 per cent in Tokyo amid reports that some of the bidders for the troubled airbag manufacturer were weighing bankruptcy as an option.
Elsewhere, Hanjin Shipping fell as much as 8.3 per cent — the biggest decliner on the Kospi — after the indebted Korean shipper was ordered by a court to return the ships it charters to their owners and sell many of its own vessels.
TPG Telecom shares fell as much as 23.1 per cent and was the worst performer on the S&P/ASX 200 after the longtime market darling’s earnings guidance for the 2017 financial year fell short of analysts’ forecasts.
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