Asia equities failed to take impetus from the primarily positive close and fresh record levels stateside. Hang Seng and Shanghai Composite conformed to the uninspired mood despite data that showed a surge in March Industrial Profits, which was likely due to base effects. Investors will be paying attention to see if the base becomes more challenging and output starts to peak; if that happens, China’s industrial profit growth will fade ahead of Q3. Sentiment also dampened by concerns for the tech sector; aftermarket regulators launched an anti-monopoly probe into Meituan. The company said that it would actively cooperate with regulators and redouble its efforts to comply with rules, reckoning that its businesses will be operating in the meantime.
Nikkei 225 traded quietly amid the ongoing state of emergency for key areas. Bank of Japan kept policy settings unchanged as expected. It said that Japan’s economic trends were likely to improve, but the pace of rebound was to remain moderate, pointing to high uncertainties of COVID-19 on the economic outlook. The Yen edged slightly lower against the US dollar after the decision, besides the FX flows supporting the USD before today’s FOMC meeting. The market consensus expects that Fed policymakers reiterate an accommodative policy stance while expressing cautious optimism in the medium-term outlook. The focus will fall on any constructive upgrades within the statement language and Chair Jerome Powell’s press conference, which could offer insight into the timeline and sequencing of the Fed reducing its asset purchases this year. Worth paying attention to US Treasury yields might be steepening ahead of the Fed decision if markets try to price a dovish tone. That put some pressure on high-beta FX like AUD, NZD and the rate-sensitive Yuan. The Tech stocks and indices would feel some downside weight as well due to their high duration aspect.
