Asian shares waver, dollar firms ahead of central bank meetings

By Ankur Banerjee

SINGAPORE (Reuters) – Asian stocks wobbled while the dollar held firm on Tuesday as traders braced for a slate of central bank meetings this week that is likely to see the U.S. Federal Reserve deliver a rate cut and the Bank of Japan stand pat for now.

Bitcoin, the best-known and the biggest cryptocurrency, remained nestled near the record high of $107,821 it touched on Monday. It was last at $106,572.

The crypto market has been on a tear since the U.S. election in early November as traders wager the incoming Trump administration will usher in a friendlier regulatory environment. Bitcoin is up 150% in 2024.

In stock markets, Australian shares rose 0.82%, with Japan’s Nikkei down 0.15% and tech-heavy Taiwan stocks 0.3% higher.

That left MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.3%. Still, the index is set for a 10% gain for the year, its strongest yearly performance since 2020.

Futures indicated a subdued opening for European stock markets, with Eurostoxx 50 futures down 0.16%, German DAX futures off 0.06% and FTSE futures 0.24% weaker.

Data on Monday showed China’s consumption slowed more than expected in November, pushing stocks lower. On Tuesday, Hong Kong’s Hang Seng Index fell 0.6%, while mainland stocks eased 0.57%.

“More stimulus measures are desperately needed,” said Tony Sycamore, market analyst at IG, noting that China’s housing market remains fragile despite recent policy support.

“However, those measures are unlikely to come until after the details of U.S. tariffs China are revealed early next year,” Sycamore said.

Chinese leaders agreed last week to raise the budget deficit to 4% of gross domestic product next year, its highest on record, while maintaining an economic growth target of around 5%, two sources with knowledge of the matter told Reuters.

Over in South Korea, the Kospi was down 0.57%, taking its yearly losses to about 7%, making it Asia’s worst performing market this year.

The market has been under pressure amid political turmoil in the country with President Yoon Suk Yeol impeached and suspended from his duties on Saturday over his short-lived attempt to impose martial law.

EYES ON CENTRAL BANKS

On the policy front, central banks in the United States, Japan, UK, Sweden, Norway, Indonesia and Thailand all meet this week, with the BOJ, the Bank of England, Norges Bank and Bank of Thailand expected to stand pat, while the Riksbank is seen cutting rates.

Bank Indonesia on the other hand is expected to hike interest rates to support the rupiah, which is rooted near its lowest in four months.

The spotlight will be on the Fed and especially on the projection for next year with markets pencilling in a 25-basis- point cut on Wednesday.

After the cut on Wednesday, markets see about a 37% chance there will be either one 25 bp cut or none at all through the whole of 2025, according to the CME FedWatch tool, up from about 21% a week earlier.

Charu Chanana, chief investment strategist at Saxo, said the market will be watching for any signs of a “hawkish cut.”

“This means that while the Fed is easing policy, it could signal caution about the pace of future cuts, either through the committee’s updated dot plot or via Chair Powell’s press conference.”

The previous dot plot indicated four rate cuts (100 bps) for 2025, but this could be revised to just three or even two cuts as inflation risks remain elevated, Chanana said.

The dollar index, which measures the U.S. currency against six rivals, was steady at 106.88 and on course for 5% gain for the year.

The yen last fetched 154.11 per dollar and remained on the defensive as chances of a hike from the BOJ this week remained slim, with a majority of economists polled by Reuters expecting the central bank to hold interest rates.

In other currencies, the euro stood at $1.050775, on course for a near 5% drop in 2024. Sterling was steady at $1.26775. [FRX/]

In commodities, oil prices were little changed as investors fretted about Chinese demand ahead of the Fed meeting. [O/R]

U.S. West Texas Intermediate crude was down 0.11% at $70.63 a barrel, while Brent crude futures eased 0.04% to $73.88 a barrel.

Spot gold was 0.1% lower at 2,650.38 per ounce, on course for 29% rise in 2024, its strongest year since 2010.

(Reporting by Ankur Banerjee in Singapore; Editing by Shri Navaratnam)