By Virginia Harrison, MarketWatch
SYDNEY (MarketWatch) — Most Asia markets rose sharply on Tuesday, with banks and commodity-linked stocks performing strongly, although Japanese shares gave back the bulk of early gains after the nation’s central bank left interest rates unchanged.
Australia’s S&P/ASX 200 index AU:XJO +1.21% rose 1.2%, South Korea’s Kospi KR:0100 +1.13% advanced 1.1% and Hong Kong’s Hang Seng Index HK:HSI +1.10% climbed 1.1%.
Japan’s Nikkei Stock Average JP:NIK +0.09% pulled back to a 0.1% gain and China’s Shanghai Composite CN:000001 +0.86% edged up 0.2%
The broad strength in Asia came after U.S. stocks extended gains into a fourth session ahead of an interest-rate decision from the U.S. Federal Reserve, with investors alert for any change in the central bank’s easing stance. Read more on the U.S. session.
The Federal Open Market Committee is scheduled to release its statement on Tuesday. Read more on what's expected from the Fed.
“The recovery in the U.S. labor market may prove to be a mixed blessing for the prices of risk assets, as lower unemployment combined with higher core inflation will further reduce the chances of additional monetary support,” Julian Jessop, Capital Economics said.
“Equity and commodity markets cannot expect both strong growth in the U.S. and further quantitative easing from the Fed, leaving them vulnerable to disappointment on one count or the other,” Jessop said.
Bank of Japan holds key rate
In Asia, the Bank of Japan concluded its two-day policy meeting on Tuesday.
The central bank left its key monetary policy unchanged but expanded a low-cost loan program to help stimulate the economy. Read more on the BoJ meeting.
Japanese stocks pulled back while the yen strengthened against the U.S. dollar after the central bank announcement.
Andrew Sullivan at Piper Jaffray attributed the yen’s strength after the decision to concerns about the Japanese central bank’s commitment to ongoing policy easing.
The dollar bought 82.07 yen after the meeting, down from ÂĄ82.35 ahead of the meeting and from ÂĄ82.26 recorded in late North American trading on Monday.
Naomi Fink, an equity strategist at Jefferies Japan said strength for the Japanese stock market — one of the region’s best performers this year, trading up 17.2% — has in part been driven by its “extreme undervaluation.”
“One of the main catalysts is overseas demand recovering. A weaker yen right now is also helpful for assets,” Fink said.
Retailers were performing strongly, with index heavyweight Fast Retailing Co. JP:9983 +1.14% FRCOY -0.98% up 1.1%. Elsewhere in the retail sector, J. Front Retailing Co. JP:3086 +1.40% climbed 1.4% and Marui Group Co. JP:8252 +1.01% gained 1%.
