Asian Stocks Near One-Week High Before BOJ, Fed as Kiwi Climbs 

• New Zealand dollar gains with milk prices; Taiwan dollar rises
• European equity futures fall as oil hovers near $43 a barrel

Asian stocks held near a one-week high and European equity index futures declined ahead of Wednesday policy decisions by the Bank of Japan and the Federal Reserve. New Zealand’s dollar rose with milk prices and oil fell.

Utilities were the best performers on the MSCI Asia Pacific Index and energy shares fell as Japanese markets resumed trading after a holiday. The Topix index advanced and the Nikkei 225 Stock Average retreated amid speculation the BOJ will switch to favoring the broader benchmark in its purchases of exchange-traded funds. The kiwi and the Taiwan dollar led gains among major currencies, while crude traded near $43 a barrel before U.S. stockpiles data.

Shifting expectations regarding the outcomes of the BOJ and Fed meetings spurred volatility in financial markets over the past two weeks. A slew of weak American economic data has pushed the probability of a U.S. rate hike this week to 20 percent in the futures market, down from more than 40 percent in late August. The BOJ has been studying the effectiveness of its stimulus programs and economists are split over the likelihood of further easing on Wednesday.

“No one is prepared to take on too much risk ahead of the Bank of Japan and the Fed Open Market Committee meetings,” Chris Weston, chief market analyst in Melbourne at IG Ltd., said in an e-mail. “The key this week for me is how the Japanese and U.S. fixed-income markets react to either central bank decisions. If real bond yields start moving up it will cause a tightening of financial conditions that will not be taken well by the credit or equity markets.”

Stocks

The MSCI Asia Pacific Index was up 0.1 percent as of 7:07 a.m. Tokyo time, after advancing 1.4 percent in the previous two sessions. A gauge of utilities companies added 0.7 percent and a measure of energy shares dropped 0.7 percent.

Japan’s Topix climbed 0.4 percent, while the Nikkei 225 fell 0.2 percent. Nicholas Smith of CLSA Ltd. said he’s “absolutely certain” the BOJ will stop buying exchange-traded funds tracking the Nikkei 225 amid criticism its use of the measure is distorting the market, and buy more Topix and JPX-Nikkei Index 400 ETFs instead.

“Shares have fallen to quite a low level, so it’s a good time to buy,” said Hiroyasu Iida, the head of investment research center at Aizawa securities. “There’s still exchange-traded fund buying from the BOJ, so there’s a limit to how much stocks can fall.”

Takata Corp. tumbled 12 percent in Tokyo on concern an auction of the troubled air-bag supplier may involve some form of bankruptcy proceedings to mitigate liabilities for buyers. Tokyo Steel Manufacturing Co. posted the biggest drop in three years after it cut prices.

Futures on the Euro Stoxx 50 Index declined less than 0.2 percent, while contracts on the S&P 500 Index were up 0.2 percent. The U.S. has housing starts figures scheduled, while companies including FedEx Corp. and Adobe Systems Inc. are due to report earnings.

Currencies

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed, after retreating 0.2 percent from a seven-week high on Monday.

The yen strengthened 0.1 percent to 101.80 per dollar following a 0.4 percent advance in the last session. The BOJ should continue with both asset purchases and its negative interest rates policy, partly to prevent currency appreciation, Koichi Hamada, adviser to Prime Minister Shinzo Abe, was cited as saying in a Tokyo Shimbun report over the weekend. Any debate to cut back on the central bank’s easing program now will bring back a pre-Abenomics, deflationary age, he said.

The kiwi appreciated 0.3 percent as milk futures climbed to $3,000 per metric ton ahead of a GlobalDairyTrade auction. The average price at the last auction on Sept. 6 was $2,793. Taiwan’s dollar also rose 0.3 percent after foreign investors boosted their holdings of the nation’s shares by $358 million on Monday, the largest net inflows in six weeks.

Commodities

Crude oil slipped 0.6 percent to $43.05 a barrel in New York, near a one-month low, on speculation a global glut will be sustained. Output in Nigeria is climbing after a cease-fire with militants allowed some production to restart, while U.S. stockpiles data on Wednesday after forecast to show an increase of 3.13 million barrels for last week.

Copper declined 0.5 percent in London, extending Monday’s retreat from a one-month high, and aluminum gained 0.1 percent. Rio Tinto Group, the world’s second-largest mining company, said it is becoming more optimistic on the outlook for commodities demand in China after recent data pointed to a pickup in the construction market.

Gold extended Monday’s rebound from a two-week low, rising 0.2 percent.

Bonds

New Zealand’s 10-year bonds fell, as they have done on all but two days this month, and their yield climbed three basis points to 2.62 percent.

The rate on U.S. Treasuries due in a decade fell one basis point to 1.70 percent, after increasing by two basis points in the last session.

Two of the Fed’s 23 primary dealers — Barclays Plc and BNP Paribas SA — are going against the grain and betting on a surprise rate hike from the Fed on Wednesday. It’s the first time more than one dealer has gone against the consensus during the week of a policy meeting since last September, data compiled by Bloomberg show.

Source: Bloomberg – Asian Stocks Near One-Week High Before BOJ, Fed as Kiwi Climbs

 

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