Asian shares sluggish, dollar steady before Fed

Tags: Stock Market
Asian shares were subdued while the dollar held steady near an eight-month high against the euro on Wednesday, as investors awaited key US data as well as a US Federal Reserve meeting that some believe might result in a more hawkish policy outlook.

The Fed's two-day policy meeting will conclude later in the session with central bank officials issuing the policy statement at 2 pm (18:00 GMT). The Fed will not be updating its economic forecasts and Chair Janet Yellen will not hold a press conference, keeping investors' focus squarely on the statement.

The US central bank is expected to cut its monthly bond-buying program by another $10 billion. With US unemployment dropping over the last few months and inflation firming, some believe the Fed could adjust its wording to suggest its willingness to hike interest rates sooner rather than later as the bank approaches its "full employment" mandate.

"If they decide to tweak their assessment of the labour market, it would accelerate the gains for the dollar," Kathy Lien, managing director of FX strategy for BK Asset Management, wrote in a note to clients.

Also later in the session, the Commerce Department is expected to report that the economy grew at a 3.2% annual pace in the second quarter, after it shrank 2.9% in the previous quarter.

On Friday, the Labor Department's nonfarm payrolls are expected to rise by 231,000 in July after an increase of 288,000 in June. The jobless rate is expected to hold steady at 6.1%.

MSCI's broadest index of Asia-Pacific shares outside Japan was slightly lower in early trade, while Japan's Nikkei stock average edged down about 0.1%.

Data released early on Wednesday showed Japan's industrial output fell 3.3% in June as companies curbed production due to a pile-up in inventories, but manufacturers expect output to rise in the coming months.

On Wall Street overnight, a weak outlook from courier company United Parcel Service triggered a broad selloff, pushing the S&P 500 below its 14-day moving average for a second straight day.

Still, almost 70% of the S&P 500 companies that have reported already have topped earnings expectations, according to Thomson Reuters data, which is well above the long-term average of 63%. More than half of companies have reported results, and over 63% of them have topped revenue forecasts, above the long-term average of 61%.

The yield on the benchmark 10-year US Treasury note stood at 2.460% in Asia, not far from its US close of 2.462% on Tuesday, when it got support from German, Italian and Spanish government debt yields all hitting record lows.

Ten-year German government bond yields, the benchmark for euro zone borrowing costs, sunk as low as 1.12%.

That helped the dollar hit an eight-month high against the euro, which dropped as low as $1.3404 and was treading water at $1.3410 in early Asian trade.

Against the yen, the dollar was steady on the day at 102.09 after it broke above the 102 level on Tuesday for the first time since early July.

The dollar index, which tracks the US unit against a basket of six major rivals, was last at 80.206, after touching a six-month high of 81.245 on Tuesday as the euro cratered.

US crude was steady on the day at $100.98 a barrel after touching an intraday low of $100.37 on Tuesday, its lowest since mid-July.


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