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Asia shares low, dollar firm ahead of central bank meetings


In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.7%

Asian shares dropped and the dollar was strong on Monday as investors looked ahead to policy meetings from the Fed, the Bank of Japan and other central banks this week.

Europe is set for a subdued open, with EUROSTOXX 50 futures down 0.1%. S&P 500 futures gained 0.2% while Nasdaq futures added 0.1%.

Oil prices reached fresh 10-month highs, further stoking inflationary pressures. U.S. West Texas Intermediate crude futures added 0.8% to $91.52, their highest level since November, while Brent crude futures advanced 0.7% to $94.55 per barrel.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.7%. Japan’s Nikkei is closed for a public holiday.

Technology shares in the region dropped, with Taiwan’s TSMC, the world’s top contract chipmaker, shedding 3% after Reuters reported that it has told its leading suppliers to delay the delivery of high-end chipmaking equipment.

In China, better-than-expected factory output and retail sales have helped Chinese bluechips which gained 0.4%.

But property sector woes pulled Hong Kong’s Hang Seng 1% lower.

Head of Greater China Research at OCBC Bank, Tommy Xie said that despite the uplifting sign of stabilization, the property market continues to be the missing puzzle piece in the economic picture.

He added that the on-the-ground feedback signals an increase in property viewing activities; however, most potential buyers are not in a haste to conclude deals because of the growing supply of apartments post relaxation.

Shares in embattled China Evergrande Group lost 25% after police in southern China detained some staff at its wealth management unit, though they later cut losses to be 1.6% lower.

This week, global central banks will take centre stage, with five of those overseeing the 10 most heavily traded currencies holding rate-setting meetings. A swathe of emerging market central banks will also hold meetings.

Markets are fully priced for a second consecutive pause from the Federal Reserve on Wednesday, with its targeted range expected to be unchanged at 5.25% to 5.5%, so the focus will be on the updated economic and rates projections. They see around 80 bps of cuts in 2024.

In theory, the FOMC meeting should be a low-volatility affair, but it is a risk that needs to be managed, said Chris Weston, head of research at Pepperstone.

He said that if the Federal Reserve revises up its rate projections for 2024, that would see rate cuts being priced out, generating renewed interest in the U.S. dollar and downward pressure on global shares.

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