Stocks Seek Direction Ahead of Fed Decision

12/12/17 10:44 PM EST
By Kenan Machado 

Asian stocks struggled for direction Wednesday, after continued weakness in tech stocks weighed on the Nasdaq overnight even as the Dow Jones Industrial Average and the S&P 500 rose to new records.

Japan's Nikkei Stock Average ended morning trading down 0.3% on fresh declines in chip-related companies. But tech-heavy indexes in South Korea and Taiwan, which have been laggards of late, rose 0.5% and 0.3%, respectively.

Reports of South Korea and the U.S. considering delaying joint military drills until after the Pyeongchang Winter Olympics in February helped tourist-reliant companies. Korean Air Lines surged 6% while Asiana Airlines and cosmetics retailer Amorepacific--which caters to international travelers--climbed nearly 2%.

Apart from the Fed, eurozone and U.K. central banks are scheduled to meet later this week. With the Fed widely expected to raise interest rates later Wednesday, market participants are focusing on the number of rate increases for 2018 and whether the central bank might trim near-term inflation forecasts.

If the latest Fed guidance warns of an inflation risk, the dollar could jump, which would weigh on other asset classes, said Vishnu Varathan, a senior economist at Mizuho Bank. The WSJ Dollar Index has already risen for seven straight days, its longest winning streak in a year.

More broadly for stocks, there aren't many compelling reasons for investors at current levels given rich valuations, he added.

After gains in U.S. financial stocks helped the Dow Jones Industrial Average and the S&P 500 hit new records, Australia's big banks rose in early trade. But they surrendered gains by early afternoon, resulting in the S&P/ASX 200 turning slightly lower.

Neighboring New Zealand's benchmark NZX 50 Index was down 0.2% ahead of the close after setting 43rd record closing high of the year on Tuesday, weighed by a 2% drop in a2 Milk.

February Brent futures rebounded nearly 1% in Asian trading, after the American Petroleum Institute said U.S. inventories logged a sizable drop.

Write to Kenan Machado at kenan.machado@wsj.com

 

(END) Dow Jones Newswires

December 12, 2017 22:44 ET (03:44 GMT)

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