Asian equities extend rally ahead of FOMC meeting

Tuesday, March 17, 2015

Asian stocks rallied strongly overnight following the rally on Wall Street as risk appetite steadily improved. Investors across the region were further encouraged by the Bank of Japan’s decision to keep its record stimulus package unchanged with an annual rise in the monetary base of 80tn yen. The central bank acknowledged the benefit of lower oil prices but the ongoing threat of sluggish growth in consumer prices would need to be closely watched and if necessary further stimulus may be required. The yen held firm above 121.00 against the dollar both yesterday and during the overnight session as trading levels dropped ahead of the FOMC rates decision tomorrow and we expect it to find firm support around this level throughout the day as investors eagerly await the FOMC statement for any change in outlook from policymakers.

Chinese stocks rallied to a seven year high with the Shanghai Composite and CSI 300 adding 1.55% and 1.39% overnight respectively, building on the previous session’s gains. Mainland equity benchmarks have rallied for five consecutive sessions as investors grow increasingly optimistic that Beijing will introduce further policy reforms which will in turn continue to drive growth. Comments from Premier Li Keqiang on Monday bolstered confidence among market participants further stating that Chinese policymakers were prepared to take further action to stimulate the economy in an effort to meet its annual growth target of around 7% this year.

Risk appetite around the world has improved significantly this week as tepid macro data from the US leads a growing number of investors to believe that the US Fed may hold off from a rates rise at least in the coming meetings with the loose monetary conditions supporting equities higher. Yesterday’s release of February industrial production data and the March Empire manufacturing index, which both came in slightly below expectations, have given investors some cause to anticipate that the Fed will keep rates low at least until the second half of the year. Crucially the FOMC statements wording will be closely scrutinised for any insight into the path of an eventual interest rate rise. 

Yen continues to find support around 121.00 against USD

JPY Curncy Japanese Yen Spot 2015 03 17 07 36 08

Shanghai Composite extends gains for a fifth straight session

SHCOMP Index Shanghai Stock Exc 2015 03 17 07 39 37

Events for today

1000

EZ

Q4

Employment

1000

DE

Mar

ZEW Survey

1000

EZ

Feb

CPI

1230

US

Feb

Housing starts

1230

US

Feb

Building Permits

All times UK Local Time

 

Topics: US Fed, JPY, BoJ, PBOC
More from: Kash Kamal