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29 Aug 2021

Global Shares Selloff in Asia Halts amid Investor Anticipation of Fed Policy

The Index Today

On Wednesday, Asian markets stabilized following three successive sessions marked by losses. This comes amid investor anticipation of an update on the U.S. Federal Reserve’s decision on a possible ahead-of-schedule tightening of monetary policy.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped by 0.1% on Wednesday, offsetting losses incurred earlier in the week. Japan’s Nikkei dipped by 0.37%, nearing its lowest since December, 2020.

The share rebound extended to Europe with Euro Stoxx 50 futures inching up by 0.5%, and FTSE futures rising by 0.8%. Nasdaq futures also soared in Asia by 0.3%. However, the S&P 500 e-minis remained unchanged following the drop of three major U.S. indices on Tuesday.

The Fed is expected to provide an update on its monetary policy on Wednesday at 1900 GMT, following the conclusion of its two-day meeting. Investors are anticipating an earlier-than-expected interest rate hike due to come into effect in March with additional three hikes set to be implemented this year.

The Chief Economist at the Bank of Singapore, Mansoor Mohi-uddin contended that Asian markets are currently being affected by concerns surrounding the upcoming Fed monetary policy, geopolitical tensions between Ukraine and Russia, and world market volatility.

He said, "We expect the Fed meeting, however, will not add to volatility. The central bank is set to only finish its quantitative easing in March and while it will signal interest rates are likely to be raised in March too, the Fed will endorse market expectations for quarterly 25bps hikes for its fed funds rate rather than more aggressive tightening this year."

©Photo: Michael Nagle/Bloomberg

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