People are seen in front of an electronic board showing stock prices outside a brokerage at a business district in Tokyo, Japan, January 4, 2017. REUTERS/Kim Kyung-Hoon By Nichola Saminather | SINGAPORE
SINGAPORE Asian stocks were mixed on Wednesday, moderating after earlier strong gains on positive global earnings and manufacturing data, while expectations that the U.S. Federal Reserve will signal a June rate increase later in the session lifted the dollar.
Futures traders were on Wednesday pricing in a 63 percent chance of a June rate hike, according to the CME Group’s FedWatch Tool, which was predicting an almost 72 percent chance a week ago and a 59 percent chance a month ago.
European markets are set for a muted start, with financial spreadbetters expecting Britain's FTSE .FTSE to open down 0.1 percent, and both Germany's DAX .GDAXI and France's CAC 40 .FCHI to begin the day flat, after all posted gains on Tuesday.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.1 percent on Wednesday, after touching a near two-year high earlier in the day.
The MSCI World index .MIWD00000PUS surpassed Tuesday's record to hit a new high on Wednesday.
Hung Tran, executive managing director at the Institute of International Finance, said investors were currently struggling to price in outcomes amid a volatile political environment.
But "the very benign investment backdrop – supported by a cyclical upturn in the global economy, central bank liquidity and a persistent savings glut – has… helped cushion markets from political shocks," Tran wrote in a report.
Hong Kong and South Korean markets are closed for the Buddha's birthday holiday, and Japan is shut from Wednesday until Friday for Golden Week.
Taiwan .TWII gained 0.1 percent. Singapore .STI and Thailand .SETI were also higher, although Chinese shares .CSI300 pulled back almost 0.5 percent.
Australian shares dropped 1 percent, failing to find new catalysts to lift above a two-year high hit on Monday.
The pan-European Stoxx index jumped to its highest level since August 2015 on Tuesday.
Overnight, Wall Street closed higher, although Nasdaq futures fell alongside Apple .AAPL shares in extended trading, after the company reported a surprise fall in iPhone sales for the second quarter.
Net income still beat analysts' estimates.
Markets are awaiting word from the Fed, which concludes its two-day meeting later on Wednesday. With the central bank largely expected to hold interest rates steady, the focus will be on language about future increases.
Since the last meeting, economic data has been mixed, with the economy growing at a sluggish 0.7 percent annual pace in the first quarter as consumer spending almost stalled.
A decline in U.S. new vehicle sales for April, following a disappointing March is also prompting worries that the industry, which has seen a nearly uninterrupted boom since 2010, may be on a downward swing.
But a surge in business investment and the fastest wage growth in a decade suggest activity will regain momentum as the year progresses.
The weak U.S. auto sales figures could make market participants wary of actively buying the dollar against the yen for now, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
"Concerns about geopolitical risks such as North Korea had weighed on the dollar against the yen recently… But the focus is shifting to whether the (strength) of U.S. economic fundamentals is for real," he said.
"There is more data coming up including the jobs data, so those need to be watched closely," Okagawa said, referring to the U.S. nonfarm payrolls report due on Friday.
The dollar was little changed at 111.995 yen JPY=D4 on Wednesday. It touched a six-week high on Tuesday but fell back to close 0.2 percent higher.
The dollar index .DXY, which tracks the greenback against a basket of trade-weighted peers, rose 0.1 percent to 99.055.
The euro EUR=EBS was marginally lower at $1.0923, following Tuesday's 0.3 percent gain.
Sterling GBP=D3 weakened almost 0.4 percent to $1.2895, surrendering most of Tuesday's 0.4 percent gain.
Eurozone unemployment remained at 9.5 percent in March, the lowest level since April 2009, while manufacturing growth for April was at or near six-year highs in France and Germany, and rose to a three-year peak in the UK, data showed overnight.
That followed figures from Asian economies including Indonesia, Malaysia, India and Japan that all showed faster manufacturing growth in April. While growth in China eased more than expected, the world's second-largest economy nevertheless avoided a sharp loss of momentum.
In commodities markets, crude advanced on a drawdown in U.S. inventories after a sharp fall on Tuesday on technical selling in a market that was already worried about oversupply and concerned that OPEC members' commitment to a deal that curbed production may be slipping.
While output from all 13 members of the Organization of Petroleum Exporting Countries together fell in April from March, supply from 11 members with production targets under the deal rose, in the first increase since the pact took effect at the start of the year.
Global benchmark Brent LCOc1 added 0.9 percent to $50.92 a barrel, after falling 2.1 percent overnight to its lowest closing price this year.
U.S. crude CLc1 recovered 0.7 percent to $48.01, after sliding to its lowest closing price since March 21 on Tuesday.
Gold XAU= slid 0.2 percent to $1,254.22 an ounce on the stronger dollar.
(Reporting by Nichola Saminather; Additional reporting by Masayuki Kitano; Editing by Sam Holmes and Eric Meijer)