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Asia cautious before Fed announcement, China hits record high

Asia cautious before Fed announcement, China hits record high
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First Published: Wed, Mar 21 2007. 03 34 PM IST
Updated: Wed, Mar 21 2007. 03 34 PM IST
SINGAPORE: Shares in Asian chip makers rose today after strong earnings from US tech firms, and China’s main index, which last month triggered a global sell-off, hit a record on gains in the resources and property sectors.
The dollar steadied after falling on a report China would stop stockpiling foreign exchange reserves, but traders were cautious ahead of a Federal Reserve policy meeting statement.
Gold held just below a two-week high, and oil prices bounced back towards $60 a barrel.
Caution before the outcome of the Fed meeting also hit share markets, with indexes in Australia, Hong Kong and South Korea all losing ground, although markets elsewhere in the region posted modest gains. Japanese markets were closed for a holiday.
The US central bank was widely expected to hold its key interest rate steady at 5.25 %, but financial markets will focus on the accompanying statement for clues on the health of the world’s biggest economy and the outlook for interest rates. The Fed is expected to announce its decision around 1815 GMT.
“Investors will be really looking to see whether an interest rate fall will be in the second or third quarter,” said Guy Hutchings, chief investment officer at MFS Investment Management Ltd., in Australia. “Also, any comments on subprime mortgage risks will be a key focus.”
Losses for lenders operating at the riskier end of the US home loan mortgage have raised fears of slowing economic growth and prompted a wave of selling in global markets last week.
Financial bookmakers in London forecast Britain’s FTSE 100 index would open down 0.3-0.4 %.
MSCI’s broadest index of Asia Pacific shares outside Japan was up 0.2 % at 0615 GMT.
Chip makers were lifted by renewed optimism on the tech sector, after US software makers Oracle Corp. and Adobe Systems Inc. reported earnings that beat Wall Street expectations after the US market close yesterday.
In Seoul, Hynix Semiconductor Inc. -- helped also by the resolution of a string of patent disputes with Toshiba Corp. -- rose 1.8 %. Taiwan Semiconductor Manufacturing Co. Ltd. rose 0.7 % and local rival United Microelectronics Corp. gained 0.8 %.
China’s main index -- whose sharp drop late last month triggered a global flight from risk that sent equity markets tumbling -- was up 0.5 %, after earlier hitting an all-time high.
“More investors are entering the market,” said analyst Zhou Lin at Huatai Securities. “Most investors are still bullish because of prospects for strong corporate earnings growth.”
Jiangxi Copper rose by the 10 % daily limit for the second straight day after announcing it would place about 4 billion yuan ($517 million) new shares to buy assets from its parent company, raise output and modernise mines.
Taiwan’s benchmark index rose 0.3 % and Singapore’s Straits Times gained 0.5 %, but Seoul’s main index slipped 0.1 % and Hong Kong’s Hang Seng was down 0.2 %.
The dollar bought around 117.25 yen at 0615 GMT, up from lows around 116.90. It had fallen from around 118 on Tuesday after comments from People’s Bank of China Governor Zhou Xiaochuan about China’s $1 trillion in reserves.
But some analysts said the dollar’s decline was unwarranted and Zhou’s comment that “we do not intend to go further and accumulate reserves”, quoted by Emerging Markets magazine, may have been misinterpreted.
“The market shrugged those comments off as a misquote or technicality that ultimately does not represent a massive change in policy,” said Sue Trinh of RBC Capital Markets in Sydney.
The euro was at 156.15 yen Against the dollar, the euro traded near $1.3315 little changed from levels overnight and up from Tuesday’s lows of $1.3268.
Oil recouped some of 21 March losses, as dealers braced for US government data later in the day expected to show a fall in fuel stocks amid robust demand. NYMEX crude for May delivery rose 25 cents to $59.50 a barrel.
“Demand growth, though perhaps overstated to some degree in the weekly data, still continues to impress,” said Martin King of First Energy Capital.
Oil slumped to a six-week low, at the end of last week and fell on 21 March as traders feared a US housing market slump and China’s move to raise interest rates at the weekend could weigh on economic growth, dampening fuel demand.
Gold traded around $659.20 an ounce, below a two-week high of $660.60 hit in New York on Tuesday, when a weaker dollar triggered fund and physical buying.
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First Published: Wed, Mar 21 2007. 03 34 PM IST
More Topics: Money Matters | Global Markets |