HONG KONG (AFP) – Asian markets swung yesterday ahead of the Federal Reserve’s much-anticipated policy announcement, while shares in Japanese car titan Nissan soared more than 20 per cent after reports said it was in merger talks with rival Honda.
There were few catalysts to drive region-wide activity before the United States central bank’s interest rate decision, with Wall Street providing a negative lead as profit-takers moved in while economic data was mixed.
The Fed is widely expected to cut borrowing costs for the third successive time when it concludes its gathering later in the day but the main focus is on its statement, with traders hoping for guidance on its plans for next year.
With inflation coming down but hovering above the two per cent target and the labour market still robust, decision-makers have been able to loosen their grip on policy since September amid optimism they can guide the economy to a soft landing.
However, with Donald Trump set to re-enter the White House next month, pledging tax cuts, deregulation and tariffs on imports from China, there are fears that prices could be reignited, forcing the Fed to re-evaluate its rates timetable.
“We are experiencing a whirlwind of change and uncertainty that profoundly affects global economies,” said Stephen Innes of SPI Asset Management.
“Questions loom: Will Donald Trump be a ‘Deal Maker in Chief’ or lean into his ‘Tariff Man’ persona? How will bond yields react? Can China effectively stimulate consumer demand? Will Trump broker peace in Eastern Europe? Will the dollar maintain its oppressive strength?”
He added that “the crucial question is whether the Federal Reserve will signal a pause starting from the January (policy) meeting”.
“My view leans toward an affirmative; the real intrigue, however, lies in how explicitly the Fed will beam this potential shift and confirm a ‘hawkish cut’.”
While Wall Street fell, Asian markets diverged. Hong Kong, Shanghai, Seoul and Bangkok rose but Sydney, Singapore, Wellington, Mumbai, Jakarta and Manila fell.
London rose even as data showed United Kingdom inflation picked up in November, firming expectations the Bank of England will hold off cutting rates this week.
Paris and Frankfurt were also both up.
Tokyo closed down, although Nissan scorched 23.7 per cent higher soon after opening in response to reports it was in preliminary merger talks with Honda, adding the move would help them better compete against Tesla and other electric vehicle makers.
Neither firm confirmed the reports but they agreed in March to explore a strategic partnership on electric vehicles (EVs), which analysts said was aimed at catching up with Chinese competitors.
The rise was the biggest since 1974, according to Bloomberg News.
On currency markets, the yen edged down against the dollar ahead of the Fed decision, while traders also awaited the conclusion of the Bank of Japan’s Thursday meeting as debate swirls about when it will hike rates.
Bitcoin pared gains after earlier hitting a record of more than USD108,315 yesterday.
