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Asian shares climb on dovish Fed, but Brexit hurdle looms.

Andia Rispah
  • December 12th, 12:19
  • Last Updated: December 12th, 13:04
  • Asian shares rose to the highest in a month after the Fed signaled rate settings unlikely to change.
  • The election outcome will determine whether Britain exits the European Union in an orderly fashion.
  • OPEC's report released on Wednesday suggested that oil markets are tighter than previously thought.

On Thursday, Asian shares rose to the highest in a month after the Fed signaled rate settings unlikely to change.

But the imminent U.K. election and deadline for the US-China trade talks kept investors cautious.

The Fed kept interest rates unchanged at its policy meeting on Wednesday. However, its indication that rates would remain on hold nudged Wall Street stocks higher.

Fed’s decision helped MSCI’s broadest index of Asia-Pacific shares outside Japan climb 0.98% to the highest since Nov.11.

Japan’s Nikkei stock index rose 0.22%, and the U.S. stock futures edged up 0.1%.

Australian shares were down 0.65%, however, weighed by the financial sector after a money-laundering scandal.

Pan-region Euro Stoxx 50 futures were up 0.03%, German DAX futures were up 0.02%, while FTSE futures were up 0.16%.

The Fed’s accommodative stance does support equities, but the chance of a disruptive election outcome in Britain is very real,” said Michael McCarthy, 

Michael McCarthy is the chief market strategist at CMC Markets in Sydney.

You also have a U.S.-China trade problem. We’re likely to see subdued trading, and some investors may lock in profits as the day progresses,” he added.

 Brexit hurdle looms

GBP traded near highest in more than two years against the euro and close to an eight-month high against the dollar before voting began. The election outcome will determine whether Britain exits the European Union in an orderly fashion.

Polls showed the Conservatives’ lead shrinking ahead of an election, which could jeopardize chances of a smooth Brexit.

U.K.’s Prime Minister- Boris Johnson’s Conservative Party, is running on a pledge to enact a swift split from the E.U. The win will end more than the three years of uncertainty.

Traders say a hung parliament or a victory for the main opposition Labour Party could cause massive disruptions. 

The Labour promises another referendum on membership of the bloc.

Against the euro, sterling rose 0.1% to 84.32 pence, close to its firmest level since May 2017. 

The pound rose 0.2% to $1.3218, just shy of its highest since March.

The euro rose 0.1% to $1.1142, close to a five-week high before a European Central Bank meeting later on Thursday, where policymakers may keep rates on hold.

Chinese shares slipped 0.2%. The activity subdued as investors awaited more news about the Sino-U.S. trade war.

Trump will meet with top advisers on Thursday to discuss tariffs on nearly $160 billion of Chinese consumer goods that scheduled to take effect on Dec. 15.

A separate source says Trump will go ahead with the tariffs, which could scuttle efforts to end a 17-month long trade dispute between the two countries.

The dollar index fell 0.37% to 97.057, briefly touching a new four-month low. It would take a significant pick-up in inflation to cause the Fed to raise rates.

Treasury yields initially fell in reaction to Powell’s comments, but they rebounded slightly in Asia. 

The yield on benchmark 10-year Treasury notes rose to 1.7966%.

U.S. crude edged up 0.15% to $58.85 a barrel. 

Brent crude rose 0.39% to $63.97 per barrel. 

OPEC’s report released on Wednesday suggested that oil markets are tighter than previously thought.

Traders are also focusing on state oil company Saudi Aramco. Saudi Aramco shares surged the maximum permitted 10% above their IPO price on their Riyadh stock market debut on Wednesday. The surge made it the world’s most valuable listed company.

About the author

Andia Rispah
Andia Rispah
Andia Rispah is a Personal Finance & Investment Writer who helps Financial Advisors to create valuable content to help their clients make smarter financial investments. I use my industry experience to write content that builds awareness, trust and turns readers into raving fans.

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