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Asian shares drop ahead of Fed news

written by Bella Palmer
msci

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.14%, Australian stocks lost 0.51%, and stocks in Tokyo edged 0.11% lower

Shares in Asia dropped and U.S. stock futures were steady on Tuesday as caution ahead of a U.S. Federal Reserve meeting and a slew of corporate earnings offset growing optimism about the global economic recovery from the coronavirus crisis.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.14%. Australian stocks lost 0.51%, but shares in China were little changed. Stocks in Tokyo edged 0.11% lower.

S&P 500 e-mini stock futures added 0.07%.

Oil rebounded in Asian trading after major oil producers stood by their demand forecasts, but there are still downside risks due to surging COVID-19 cases in India, the world’s third-biggest oil importer.

Analysts said some investors may be taking profits on equities, but sentiment remains positive due to rising coronavirus vaccination rates in many countries.

There are two reasons to remain positive on equities and commodities, said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management Co in Tokyo. The global economy is likely to continue to strengthen and many advanced economies are heading for a reopening due to progress in vaccinations.

However, despite the hopeful signs, a bullish session on Wall Street failed to inspire Asian markets. The S&P 500 and Nasdaq closed at record highs on Monday, fuelled by heavyweight growth stocks ahead of a deluge of earnings reports this week. The Dow Jones Industrial Average (DJIA) finished 0.18% lower.

Sentiment for equities in many markets has improved steadily this month due to expectations that rising vaccination rates will allow more economies to resume normal activity.

However, one area of concern is India, which is struggling with a surge of Covid cases that has overwhelmed its healthcare system.

Many investors stuck to the sidelines ahead of a Fed meeting ending Wednesday, where the U.S. central bank is expected to confirm that it will maintain with its easy monetary policy to bolster the economy.

Bond traders are also closely watching an auction of $62-billion of seven-year U.S. Treasuries later on Tuesday.

The Treasury saw very weak demand at a seven-year debt auction in February, which sparked a brutal market selloff across the globe. The notes also saw tepid, albeit improved, demand in March.

Ahead of the auction results, seven-year yields edged up to 1.2689%, while benchmark 10-year yields rose slightly to 1.5755%.

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