Asian Stocks Down, “Tug-of-War" Ahead of Fed Policy Decision Continues

© Reuters.

By Gina Lee

AiVIF.com – Asia Pacific stocks were mostly down Tuesday morning even after their U.S. counterparts closed at a record high. Investors now await the latest U.S. Federal Reserve policy decision.

Japan’s Nikkei 225 gained 0.66% by 10:08 PM ET (2:08 AM GMT) while South Korea’s KOSPI inched down 0.05%.

In Australia, the ASX 200 rose 0.99% as the Reserve Bank of Australia released the minutes from its latest meeting.

Hong Kong’s Hang Seng Index fell 1.12%. China’s Shanghai Composite slid 1.16% and the Shenzhen Component edged down 0.19%. All three markets re-opened after their respective holidays.

U.S. shares hit an all-time high on Monday thanks to gains in technology stocks before steadying. The benchmark 10-year Treasury yield also steadied under 1.5% after rising Monday.

The Fed is due to hand down its latest policy decision on Wednesday. Investors will be looking for any clues from the central bank on its timetable to begin asset tapering. However, it is widely expected that the Fed’s decision will keep the rate of bond purchases even as it delivers a forecast for interest rate hikes in 2023.

“We’re in a tug-of-war between the understanding that we’re having great economic growth and great earnings growth juxtaposed with the fact that we need to get our head wrapped around what inflation looks like and what it will mean both to profit margins and to the Fed,” National Securities chief strategist Art Hogan told Bloomberg.

The Fed is one of several central banks handing down their policy decisions throughout the week. The Swiss National Bank and Norges Bank will hand down their policy decisions on Thursday, with the Bank of Japan following on Friday.

Ahead of the Fed policy decision, investors await a slew of data, including the producer price index, retail sales and industrial production, due later in the day, for further clues into the U.S. economy’s health.

U.S. Treasury Secretary Janet Yellen will also testify on the federal budget before Thursday’s House of Representatives panel.

Elsewhere, as the Group of Seven (G7) summit in the U.K.’s Cornwall drew to a close on Jun. 13, the EU-U.S. summit is set to take place in Brussels later in the day. U.S. President Joe Biden is also scheduled to meet his Russian counterpart Vladimir Putin in Geneva on Wednesday.

COVID-19 also continues to be on investors’ radars, with U.K. Prime Minister Boris Johnson delaying the country’s exit from lockdown as concerns mount over a surge in delta variant cases. The exit will now take place on Jul. 19, three weeks later than the originally planned Jun. 21.

In cryptocurrencies, bitcoin got a boost from hedge fund manager Paul Tudor Jones, who re-endorsed the coin in a television interview on Monday. However, it continued its rollercoaster ride, pulling back after briefly hitting the $41,000 mark.