By Rae Wee
SINGAPORE (Reuters) -Asian shares were mixed on Wednesday, while oil prices slid to six-month lows as traders waited for the year’s final policy decision from the Federal Reserve and clues on whether the central bank will cut rates next year.
Brent bottomed at $72.57 a barrel, its lowest since late June, while U.S. crude slid to $68.01 a barrel on concerns of softening demand and oversupply. [O/R]
The Fed takes centre stage on Wednesday, where it is due to announce its rate decision at the conclusion of its two-day policy meeting.
Market expectations are for policymakers to keep rates on hold, unfazed by a reading on U.S. inflation that came in largely in line with consensus.
That leaves the focus on Powell’s press conference and the Fed’s dot plot of future policy trajectory.
“The December FOMC is poised to be short on action, given the consensus for no rate hike, but may nevertheless be big on drama,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank.
“In particular, as a refreshed dot plot accompanied by revisions to the summary of economic projections offer ample fodder to interpret the propensity for a Fed pivot… as well as confidence around a soft landing.
“But the growing danger is that the Fed’s inclination may be to calibrate expectations for a pivot.”
Nonetheless, investors continue to bet that the Fed is all but certain to begin easing monetary policy in 2024, and are pricing in a 75% chance the first cut could come as early as May, according to the CME FedWatch tool.
Ahead of the decision, markets stayed on guard, sending MSCI’s broadest index of Asia-Pacific shares outside Japan falling 0.7%.
Japan’s Nikkei gained 0.25%, while EUROSTOXX 50 futures slipped 0.02%. FTSE futures were little changed.
S&P 500 futures meanwhile rose 0.1% while Nasdaq futures bounced 0.17%, after Wall Street on Tuesday notched fresh 2023 highs. [.N]
U.S. bond yields hovered near their recent lows, with the two-year Treasury yield last at 4.7327%, having earlier in December hit a roughly six-month trough of 4.5400%.
The benchmark 10-year yield steadied at 4.2063%, not far from its lowest in three months. [US/]
CHINA WOES
Elsewhere in Asia, Chinese blue-chip stocks sank 1.6% while Hong Kong’s Hang Seng Index fell more than 1%.
China will step up policy adjustments to support an economic recovery in 2024, state media said on Tuesday, following an agenda-setting meeting of the country’s top leaders.
However, the lack of strong stimulus measures from Beijing at the Central Economic Work Conference left investors disappointed, particularly as headwinds persist on China’s beleaguered property sector.
“The lack of new discussion around the property sector could be disappointing to some investors, and we think this may suggest the authority is still exploring ways to ensure stable development of the sector,” analysts at Goldman Sachs said in a note.
The Hang Seng Mainland Properties Index slid more than 2%.
“For the sector to stabilise, the market needs to see more concrete evidence of implementation of such support measures and the turnaround in the property demand and sales,” said Tan Yong Hong, head of credit research for Asia fixed income at M&G Investments, citing various government measures taken this year such as to support financing needs.
Elsewhere, the U.S. dollar was on the defensive and stood at $1.2549 on the British pound.
British wage growth slowed by the most in almost two years, data on Tuesday showed, though pay was likely still rising too fast for the Bank of England to relax its tough stance against cutting interest rates.
The greenback meanwhile last bought 145.77 yen.
While investors look for signs of rate cuts next year across major central banks, over in Japan, many are betting for the Bank of Japan (BOJ) to shift away from its ultra-loose monetary policy.
In commodity markets, gold slipped to a more than three-week low of $1,973.35 an ounce.
(Reporting by Rae Wee; Editing by Sam Holmes and Edmund Klamann)
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