Asian shares rise on bets Fed may stay cautious

Asian shares rise on bets Fed may stay cautious

TOKYO - Asian shares rose on Tuesday, following Wall Street's lead, as investors speculated that weaker-than-expected US data could prompt the Federal Reserve to express caution this week on the timing of a future rate hike.

Financial spreadbetters expected Britain's FTSE 100 .FTSE to open 8 to 14 points lower, or down as much as 0.2 per cent; Germany's DAX .GDAXI to open 10 to 15 points lower, or down as much as 0.1 per cent; and France's CAC 40 .FCHI to open between flat and 4 points lower, as wariness over the Fed offset the cheer generated by the European Central Bank's easing programme launched last week.

"Although the ECB is giving the bulls a strong impetus to take markets higher, there's a natural reticence to do so just ahead of the Fed meeting where they may set markets up for a June rate hike," Jonathan Sudaria, a dealer at Capital Spreads, said in a note.

US crude oil CLc1 remained under pressure from a global supply glut, after losing as much as 4 per cent in the previous session to hit a six-year low. It was last down about 0.3 per cent at $43.75 a barrel. Brent LCOc1 steadied, edging up 0.2 per cent to $54.06.

The Federal Open Market Committee is scheduled to begin its two-day policy meeting later on Tuesday, and many analysts had expected the central bank to drop the word "patient" from its formal statement on the timing of its first interest rate increase since 2006. Economists polled by Reuters were almost evenly split on whether a rate increase will come in June or later in the year.

But downbeat data on US manufacturing, industrial output and housing on Monday offered the Fed a reason to toe a cautious line on policy.

"We expect the Fed to drop the word 'patient' but at the same time it will say its policy will depend on economic data to keep its hand free so it can raise rates when it wants, whether it is June or September," said Shuji Shirota, the head of macro economics strategy at HSBC Securities in Tokyo.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.7 per cent, after all three major US stock indexes posted gains of over 1 per cent on Monday.

Chinese shares .SSEC rose 0.9 per cent to near 7-year highs, extending gains on hopes that the Chinese government will loosen policy to bolster its slowing economy.

Wu Wenzhe, fund manager at China International Management, likened China's market rally to the US stock market bull run since the Fed's quantitative easing in 2009, saying Beijing's use of monetary and fiscal policies to bolster the economy is "identical to what happened in the US"

Australian shares rallied 0.8 per cent after the Reserve Bank of Australia (RBA) left the door wide open for another interest rate cut. Minutes of its March policy meeting showed the central bank believed a pause this month was prudent following an easing in February.

Japan's Nikkei stock average .N225 ended up 1 per cent, marking a fresh 15-year closing high.

As expected, the Bank of Japan maintained its massive stimulus and its optimistic assessment of the economy, signalling that the country is on course to emerge from recession without additional monetary loosening.

Against its Japanese counterpart, the dollar was slightly lower on the day at 121.25 JPY=, but still not far from a nearly eight-year high of 122.04 logged one week ago.

The euro rose 0.2 per cent to $1.0590 EUR=, well off Monday's 12-year low of $1.0457.

The dollar index edged down about 0.1 per cent on the day to 99.525 .DXY, moving away from last week's 12-year high above 100.00.

The dollar's recent strength has weighed on dollar-denominated commodities. Those commodities found support as the dollar's rally paused. Spot gold XAU= added about 0.3 per cent to $1,156.80 an ounce, pulling away from its lowest levels in over three months as traders awaited the outcome of the Fed meeting.

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