Kristian Rouz — Stock markets outside the US rallied mostly, while the greenback steadied in overseas trading after the US Federal Reserve hinted at a forthcoming new ‘rate regime' during its ongoing policy meeting. Corporate activity pushed most European shares up. In Asia-Pacific, mainland China extended yesterday's losses due to failed IPOs, and Japan swung up and down, ending the day in the green.
Janet Yellen, the US Fed chair, is unlikely to take an overtly hawkish stance on policy tightening, and such an understanding rendered Asia-Pacific investors optimistic, supporting the bull market. Besides, past three days of losses created a situation where there are many stocks that cost slightly below their realistic value. In other words, Asian markets are oversold, and today's gain are mostly a result of natural correction.
In Japan, the broader Topix Index rose 0.3%. Today's trading was dominated by thin volumes and low overall activity in anticipation of the news from across the Pacific. Food producers led gains, while heavy industries, metal manufacturers in particular, posted losses.
"The directionless market is because there are just so many catalysts we're waiting for," Akio Yoshino of Tokyo-based Amundi Japan Ltd. said. "We want to see what happens with the FOMC, Greece and Europe and whether they come to an agreement, and Japan's growth strategy."
In Korea, the Kospi Index rose 0.2%, while Australia's S&P/ASX 200 rose 0.3%, and the Kiwi NZX 50 Index shed 0.1%. A steadier greenback boosted Asian exports, as the yen traded at 123.40 per 1 dollar.
Most European shares gained, led by the rally in telecom equities, and the overall favourable corporate environment. The STOXX Europe 600 Index added 0.2%, while the pan-European FTSEurofirst 300 Index rose 0.3%, driven by the 3.9% gains in Telecom Italia, and the 8.7% jump in the drink-maker Remy Cointreau.
The common currency was little changed at $1.1252, near last week's average. Currency markets are lacking any substantial activity ahead of the Fed report, due at 6 pm GMT on Wednesday. The Fed's report will unlikely state September as the decided upon moment for the rate hike, instead, Yellen is expected to speak in terms of a flexible approach and a gradual tightening cycle. The Fed is unlikely to deliver any concrete message on timing, meaning the actual interest hike will happen at the right moment as the regulator imagines it based upon the macro data.
Such an approach has a significant implicit flaw, which is it stirs uncertainty in the markets, which limits substantial capital movements.
In commodities, crude prices were little changed. As demand is getting stronger, so is output due to the ever-rising drilling rig efficiency in North America. US oil price was at $60.11/bbl, while in London, the Brent benchmark traded at $63.78/bbl. Gold sells at $1,180.50/oz, well below the psychological threshold of $1,300/oz, as investors have recently shifted focus to the US and German governmental debt as safer haven assets.