Asia markets focus on Fed as USA stocks climb and dollar slides

Asia markets focus on Fed as USA stocks climb and dollar slides”

"The surge was yet another testament that the reinvigoration of the Trump trades is gaining traction", Greg McKenna, chief market strategist at AxiTrader, said.

Anticipation of this week's monetary policy meeting also saw USA bond yields rise in recent days, with investors expecting the Fed will start gradually tightening the money supply.

Next week's meeting is not expected to result in an interest rate increase, but investors will focus on how Fed Chair Janet Yellen characterises recent inflation readings, for clues to the likelihood of a hike in December, as well as on how the U.S. central bank will begin to wind down its $US4.5 trillion ($A5.6 trillion) balance sheet.

Down Under, SPI futures edged up 0.23 percent to 5,727.

Meanwhile, other central banks, including in the economically resurgent euro zone, may begin tightening policy, leading to more restrictive financial conditions globally.

"The FOMC has transparently telegraphed the start of unwind, so financial markets are expected to continue to take the balance sheet policy change in stride", Mickey Levy of Berenberg Capital Markets said in a research note.

"Janet Yellen has a press conference, and that and the statement will perhaps provide some insight into what they're going to do in terms of deleveraging their balance sheet", said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama. As the Fed rolled out its three separate rounds of massive purchases, stocks shot up, while the dollar sank along with yields on USA debt.

CURRENCY: The dollar gained to 111.19 yen from Friday's 110.82 yen.

The country's PSEi Composite gained nearly 1.4 percent, hitting an all-time high of ₱8,294.14.

Analysts said despite the expected rise in borrowing costs, investors were still piling into equity markets on renewed hopes that Trump can push through the market-friendly policies that helped drive a global rally at the start of the year.

New residential construction in the US unexpectedly decreased in the month of August, according to a report released by the Commerce Department on Tuesday. The Dow Jones Industrial Average rose 0.28% to 22,331.35 points, the S&P 500 gained 0.15% to 2,503.87 points and the Nasdaq Composite added 0.1% to 6,454.64 points.

"As that balance sheet drops, that's potentially going to leave us with higher long-term rates".

Ahead of Fed's meeting, MSCI's broadest index of Asia-pacific shares outside Japan was up 1 percent to $544.13, while Japanese markets are closed for a public holiday. The Nikkei 225 had surged almost 2 percent Tuesday to close at 20,299.38. They ended at 2.23% on Monday.

ENERGY: Benchmark U.S. crude added 2 cents to $49.91 per barrel in electronic trading on the New York Mercantile Exchange.

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