Asian shares held tight ranges on Tuesday before the a Federal Reserve policy meeting, but were broadly supported close to six-months on anticipations the central bank may strike a dovish tone, while fresh Brexit worries persistent the pound.
MSCI’s widest index of Asia-Pacific shares outside Japan was flat, easing back from its highest level since September 21 hit previous in the session.
Japan’s Nikkei average plunged 0.3 percent, while Australian stocks eased 0.1 percent.
Chinese stocks held tight ranges, with benchmark Shanghai Composite floating almost flat, the blue-chip CSI 300 falling 0.2 percent, and the Hang Seng border 0.1 percent lower.
All three major U.S. indexes increased all-night, raised by the bank and technology sectors, with the Dow Jones Industrial Average, the S&P 500, and the NASDAQ Composite adding between 0.3 and 0.4 percent each.
"Speculators appear to be betting on a rise in stock prices on the back of a dovish Fed. The Fed is unlikely to kill such hopes. Yet there is a risk the Fed could tone down its dovishness," said Masanari Takada, cross-asset strategist at Nomura Securities.
With worldwide financial development appearing to sluggish, traders were focused on the Fed gathering, which kicks off its two-day policy meeting later in the day, for clues about the likely path of U.S. borrowing costs.
Investors will particularly look to see whether legislators have adequately lowered their interest rate predictions to more closely line up their “dot plot”, a diagram showing individual legislators’ rate views for the next three years.
Also anticipated are more details on a plan to prevent cutting the Fed’s holdings of almost $3.8 trillion in bonds.
"A key focus is when the Fed will omit the word 'patient' from its statement, as that would be a pre-requisite for a rate hike," said Toru Yamamoto, chief fixed income strategist at Daiwa Securities.
May’s Brexit in Chaos
In the currency market, the pound found steadier footing on Tuesday after falling to as low as $1.3183 all-night as legislators cast doubt on Prime Minister Theresa May’s third endeavor to get parliament to back her Brexit deal.
May’s Brexit plans were thrown into more confusion when the speaker of parliament ruled that she could not put her separation deal to a new vote if it was re-submitted in fundamentally different form.
May has only two days to win agreement for her deal to leave the European Union if she wants to go to a summit with the alliance’s leaders on Thursday with something to offer them in return for more time.
In the meantime, senior diplomats said the European Union leaders could hold off making any final decision on any Brexit deferral when they meet in Brussels later this week, relying on what exactly May ask them for.
The dollar index versus a basket of six major currencies barely moved and was at 96.475, floating nearly a two-week low. The index has lost 1.2 percent after hitting a three-month high of 97.710 marked on March 7.
The Japanese yen edged up 0.2 percent to 111.19 yen to the dollar, while the euro was nearly flat at $1.1342.
Oil prices drifted just below 2019 highs on Tuesday, supported by continuing supply cuts led by producer club OPEC. U.S. sanctions versus oil producers Iran and Venezuela are also increasing crude prices, although traders say the market looks covered by growing American yield.
U.S. West Texas Intermediate (WTI) futures were slight changed at $59.09 per barrel, nearly the 2019 high of $59.23 reached the preceding day, while Brent crude futures edged up 0.1 percent to $67.62 per barrel, also not far from this year's high of $68.14.