Asian Investors Biding Time Ahead of ECB, Fed Policy Decisions

Global investors are likely more concerned about the Fed’s interest rate decision and especially how the fixed income market responds. If yields continue to press lower after the Fed makes its call then this will signal that investors feel the central bank didn’t do enough to sustain the expansion in the U.S. economy.
James Hyerczyk
Asia Pacific Stock Markets

The major Asia Pacific stock indexes are trading higher on Tuesday, following the lead of Wall Street from the previous session. Volume and volatility are on the light side with investors a little tentative ahead of the European Central Bank policy meeting on July 25. Investors are looking for the ECB to cut its benchmark interest rate by 10-basis points, or at the very least, announce stimulus measures for September.

Global investors are likely more concerned about the Fed’s interest rate decision and especially how the fixed income market responds. If yields continue to press lower after the Fed makes its call then this will signal that investors feel the central bank didn’t do enough to sustain the expansion in the U.S. economy.

At 05:22 GMT, Japan’s Nikkei 225 Index is trading 21670.38, up 253.59 or +1.18 percent. Hong Kong’s Hang Seng Index is at 28413.01, up 41.75 or +0.15 percent and South Korea’s KOSPI Index is at 2102.43, up 9.09 or +0.43 percent.

China’s Shanghai Index is trading 2888.79, up 1.81 or +0.06 percent and Australia’s S&P/ASX 200 is at 6722.40, up 31.20 or +0.47 percent.

Stock-Related News

CNBC reported that Shares on China’s new Nasdaq-style tech board, the “STAR Market,” mostly declined by the lunch break after seeing massive gains on their debut trading day on Monday. The price action suggests profit-taking was responsible for the weakness after the market became overbid.

In Japan, semiconductor equipment manufacturer Tokyo Electron jumped about 3%. In South Korea, Hyundai Motor fell more than 1% after an earnings miss, despite a surge in quarterly profits to a seven year high. Chipmaker SK Hynix rose more than 2% on the back of positive comments by Goldman Sachs.

Geopolitics and Trade

Traders were monitoring the situation in the Middle East between the UK and Iran after Iran’s seizure of a British tanker last week.

In the UK, investors will find out who its next prime minister will be on Tuesday when the winner of the ruling Conservative Party’s leadership race is announced. Former Foreign Minister Boris Johnson if facing the current holder of that post Jeremy Hunt.

CNBC said, “On the trade front, U.S. President Donald Trump agreed to request for ‘timely licensing decisions’ from the Department of Commerce regarding Chinese telecommunications giant Huawei, following a meeting with tech and telecommunications executives on Monday. That comes as Huawei, which relies on American suppliers for components and software in some of its products, remains on a Washington trade blacklist.”

This news is important because recent reports have said that the situation with Huawei is a major sticking point in US-China trade negotiations. Allowing some leeway for Huawei to buy U.S. components may help pave the way to an eventual trade deal between the two economic powerhouses.

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