James Hyerczyk
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Shanghai Stock Exchange.

The major Asian Pacific stock indexes are trading mostly higher early Wednesday as investors await the U.S. Federal Reserve’s interest rate and monetary policy decisions due later in the day stateside. Investors continue to monitor the news for any updates on a U.S.-China trade deal ahead of the December 15 deadline. Australian shares are posting the biggest gain, while shares in Japan are struggling to get back to even.

At 05:44 GMT, Japan’s Nikkei 225 Index is trading 23360.93, down 49.26 or -0.21%. Hong Kong’s Hang Seng Index is at 26521.64, up 85.02 or +0.32% and South Korea’s KOSPI Index is trading 2103.07, up 5.07 or +0.24%.

In China, the Shanghai Index is at 2921.47, up 4.15 or +0.14%, and in Australia, the S&P/ASX 200 Index is trading 6752.60, up 45.70 or +0.68%.

Fed Expected to Hold Rates Steady

According to CNBC, “The Fed is expected to conclude its December meeting at 19:00 GMT on Wednesday by signaling it remains on hold for the time being and is monitoring economic developments.”

“Federal Reserve Chairman Jerome Powell is also expected to vow to do whatever it takes to keep the short-term lending market stable as year-end approaches and banks move to spruce up their balance sheets and make them look safer for regulatory purposes.”

“The Fed could give a nod to an improved economy and lower unemployment, following Friday’s blowout November jobs report. “

“The FOMC is confident that current policy settings are at an appropriate level to lift US inflation back towards target,” Joseph Capurso, senior currency strategist at Commonwealth Bank of Australia, wrote in a note. “We doubt there has been any material reassessment of this view since the October meeting.


Uncertainty over New Tariffs Driving Volatile Price Action

Investors aren’t sure how to play the December 15 deadline for new U.S. tariffs on Chinese imports, which may be why the Asian Pacific shares have been mostly rangebound over the past week.

The latest news has The Wall Street Journal reporting Tuesday that the U.S. plans to delay slapping China with additional tariffs as both sides try to work out the agreement.

Although the current price action suggests the markets now assume or anticipate that some form of phase one deal will be signed, the negotiations appear to be going down to the wire.

The latest reports have U.S. negotiators asking Chinese officials to commit to some agricultural purchases upfront before moving forward with a deal, according to The Wall Street Journal. Meanwhile, China wants its agricultural purchases to be proportional with the amount of tariffs the U.S. rolls back.

Compliance with any agreement is still a key issue. The U.S. is also reportedly pushing for a quarterly review of the promised purchases since it will be easy for China to renege on the deal in the future.

White House’s Kudlow Say December Tariffs are ‘Still on the Table’

Perhaps capping stock market gains are comments from White House Economic advisor Larry Kudlow, who on Tuesday downplayed reports of a tariff delay, noting the Trump Administration could still move forward with new levies targeting Chinese goods.

“The reality is those tariffs are still on the table, the December 15 tariffs, and the president has indicated if the short strokes remaining in negotiations do not pan out to his liking that those tariffs could go back into place,” Kudlow said at a Wall Street Journal conference.

“So, they could not, but they also could. There is no definitive decision on that yet, Kudlow, director of the National Economic Council, added.

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