Asia morning update

The Fed left rates unchanged as expected, shrugging off data weakness while the latest ADP private payrolls report surprised on the upside, giving confidence to Friday’s non-farm payrolls (NFP) data in meeting consensus.

Federal reserve
Source: Bloomberg

Dollar rose, though movements on Wall Street remain largely earnings driven. Asian market meanwhile has its data focus of the day.

The Federal Open Market Committee (FOMC) meeting passed with no change in rates as expected, clearing the way for the Fed to lift-off once again in their next meeting in June. Reactions had however been seen on the USD index, which inched up from 99.00 levels to trade above 99.30 into Thursday morning here in Asia. In line with what many had suspected, the Fed noted the recent data weakness but kept to a language that is consistent with their intention to gradually increase interest rates.

As per usual, the Fed also caveated in their post-meeting statement that the actual path of Fed fund rates would be data-driven. It had perhaps helped with the latest ADP private payrolls coming in higher than expected at 177k, serving as a positive lead to Friday’s NFP data. Certainly June’s meeting has been marked out by the markets as a potential meeting for the next rate hike and analysts have been tuning back to implied probabilities. Multiple Fed speakers have been scheduled for Friday including Federal Reserve chair Janet Yellen, who could further drum up expectation for June’s meeting and bring in interest for the US dollar.

US markets meanwhile saw little reaction to the expected meeting conclusion with moderate movements clocked. Notably, however, materials had been under pressure midweek from the decline in commodity prices that could infect Asian markets in the day. Onshore markets in Japan remain on holiday for the rest of the week and early movers in the region have seen mixed movements. On one hand, the South Korean market returned with over 0.5% gains as of 8:30am Singapore time. On the other hand, the commodity-heavy Australian market slipped. Mixed returns have been expected for regional markets in the morning while the key data highlight expected in the day is likely to be China’s Caixin services PMI data.

For the local Straits Times Index (STI) that had topped recent highs on Wednesday, mixed earnings came through yesterday from Starhub and Sembcorp industries, though the light weighting of both stocks could see little material impact on the STI. Watch for China’s Caixin PMI data today. The US hours would see March trade and durable goods data from the US. US House of Representatives are also expected to vote on the healthcare reform bill in the day in a latest report.

Yesterday: S&P 500 -0.13%; DJIA +0.04%; DAX +0.16%; FTSE -0.21%

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