Asia stocks head for muted start as rally eases

An electronic stock board reflects pedestrians outside a securities firm in Tokyo. (Bloomberg pic)

SYDNEY: Asian stocks were set for a cautious start after Federal Reserve meeting minutes hinted at an enduring bias for rate hikes. Treasury yields ticked higher and the dollar was little changed.

Australian shares were steady, while futures on Japanese equities slipped, after the post-Christmas rally drove the regional MSCI Asia Pacific Index to the highest since October.

The S&P 500 Index nudged higher as the Fed was seen remaining patient in its approach to further hikes without ruling them out if economic growth picks up.

The yuan climbed overnight as some analysts warned there’s little room for it to appreciate much further amid bets the authorities will keep the currency steady.

The rally in risk assets is showing signs of faltering with MSCI’s global gauge of stocks up about 15% since Christmas Day.

Technical indicators, from closely watched moving averages to relative-strength indexes, signal that gains from here may be difficult to come by as investors look for progress from this week’s trade negotiations in Washington.

Fed policy makers see 2019 marking the end of their balance sheet run-off, but not necessarily their interest-rate increases.

“What helped was the Fed acknowledging the global slowdown, the rise in policy uncertainty, and most importantly, that inflation is still going to struggle to have any upward thrust,” Joe Davis, chief economist and head of investment strategy at Vanguard Group, told Bloomberg TV.

“When you put all three together, there were no big surprises. But it is very revealing in terms of where the Fed sentiment is.”

Next up on traders’ watch lists is jobs data in Australia on Thursday and European Central Bank meeting minutes, followed by President Mario Draghi’s speech on Friday.

Earlier, the pound dipped as Fitch Ratings said it may cut the UK’s sovereign debt rating on uncertainty surrounding Brexit.

Gold traded near the highest since May and palladium soared to a record as a shortage started to bite.