HONG KONG: Asian traders held their breath on Tuesday ahead of a crucial meeting of the US Federal Reserve’s policy-setting panel as they awaited indications of the size of a likely stimulus package. With US mid-term elections adding to jitters, Tokyo, Sydney and Hong Kong all closed flat, while Shanghai was down 0.28 percent.
All eyes were on the Fed’s two-day open market committee meeting, due to open Tuesday, for indications of the size of likely measures— dubbed quantitative easing—to rouse the world’s largest economy from its torpor.
“It’s all about QE2,” Nick Burmester, a trader at MF Global in Sydney, told Dow Jones Newswires, referring to the expected second round of US economic easing after similar moves during the global downturn.
“Everyone’s getting bearish on the size of it.”
Ahead of the Fed meeting traders have tried to second-guess its outcome. Doubts about how substantial the package will be were reinforced Monday by data from the Institute of Supply Management (ISM) showing US manufacturing unexpectedly picked up in October.
The ISM said its survey of purchasing managers nationwide revealed strong gains in new orders and production, pushing up its index to 56.9 percent, from 54.5 percent in September.
Wall Street ended flat Monday as investors clung to the sidelines on the eve of US congressional and local elections and the start of the Fed meeting.
Tokyo’s Nikkei index ended up just 5.26 points at 9,159.98.
Japanese Finance Minister Yoshihiko Noda reiterated anxiety about his country’s economy and the strong yen—a bugbear for Japanese exporters—as traders also watch for a Bank of Japan meeting on Thursday that could produce its own stimulus measures.
“There are expectations that the economy will pick up on the back of improvements in overseas economies and the effects of various policy steps,” said Noda.
“But there are also concerns that a possible deterioration in foreign economies as well as fluctuations in exchange rates will put further downward pressure on the economy,” he said.
Easing such anxieties, the US manufacturing data helped the dollar recover from Monday’s fall, in which it moved closer to its lowest level since World War II.
In Tokyo trade the dollar was at 80.57 yen compared with 80.49 yen in New York overnight. The euro fetched $1.3932, up from $1.3897, and 112.22 yen, up from 111.85.
Analysts in Hong Kong and China generally remained bullish after strong rallies on Monday in which the Hang Seng index surged 2.41 percent and Shanghai 2.52 percent.
Monday’s rises came after mainland purchasing managers indexes showed production and new orders continued to pick up in October.
“The general uptrend will stay intact as the yuan continues to appreciate and attract hot money inflows,” Chen Jinren, analyst at Huatai Securities, said in Shanghai.
Oil rose on the back of the upbeat industrial data from the United States and China, the world’s major energy consumers.
Comments from Saudi Oil Minister Ali al-Nuaimi that current prices at above 80 dollars a barrel were within a “very comfortable zone” also supported sentiment, analysts said.
New York’s main contract, light sweet crude for December delivery, rose 41 cents to 83.36 dollars a barrel. Brent North Sea crude for December was up 30 cents at $84.92.
Gold closed at $1,356 to $1,357 an ounce in Hong Kong, down from Monday’s finish of $1,362 to $1,363.
