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Asia markets turn focus to Fed meeting

Wednesday 02:40 GMT

Overview

A rally in crude oil prices that erased the losses of the previous session failed to bolster energy stocks in Asia, as bond and currency traders also shunned major moves ahead of the US Federal Reserve’s interest rates decision later in the day.

Hot topic

Crude was climbing in Asia after a slide on Tuesday. Brent, the international benchmark, was up 1.3 per cent at $51.58 a barrel — back above its opening level for the week and more than compensating for a 0.8 per cent drop the day prior.

West Texas Intermediate, the US marker, was up 1.5 per cent at $48.45, having closed lower by as much on Tuesday.

The boost came after Saudi Arabia’s energy ministry affirmed the country’s commitment to “stabilising the global oil market”. The statement was rushed out on Tuesday night after Opec’s monthly report showed Saudi production increased in February, adding to supply concerns over a rebound in US shale oil output.

Equities

Stock markets’ response to the climb in crude prices was muted, with energy stocks largely following on from a drop of 0.9 per cent by the S&P 500 energy sector on Wall Street.

In Australia, the S&P/ASX 200 index was down 0.4 per cent as the energy sector dropped 0.4 per cent. Miners bucked the trend, with BHP Billiton up 0.6 per cent and rival Rio Tinto climbing 1.5 per cent.

Tokyo’s Topix index was also pulled lower, dropping 0.4 per cent as its energy segment shed 1.5 per cent. Inpex fell 1.7 per cent while Japan Petroleum Exploration lost 2.2 per cent.

In Hong Kong the Hang Seng Index retreated 0.4 per cent. State-owned Chinese petroleum companies were among the hardest hit energy stocks, with Cnooc down 1.2 per cent and PetroChina off 0.9 per cent.

Forex

Currencies were holding steady in the lead up to Wednesday’s Fed meeting, at which it is widely tipped to raise interest rates.

The US dollar index, which tracks the greenback against a basket of peers, was flat at 101.66. One of the only notable gainers was the New Zealand dollar, which firmed 0.2 per cent to NZ$0.6935 against its US counterpart.

Fixed income

Sovereign bond markets were in wait-and-see mode ahead of Wednesday’s Fed decision. The yield, which moves opposite to price, on 10-year US treasuries was flat at 2.597 per cent.

That was mirrored by government bonds across the region, with the exception of 10-year Japanese government bonds, whose yield was down 1bp at 0.082 per cent.

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