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|31 January, 2019

Thursday outlook: Asian shares trade near four-month high on "patient" Fed

Asian shares tracked Wall Street higher on Thursday, following the Fed's dovish stance. Middle East markets were mixed on Wednesday, as UAE markets dropped. More commentary on oil prices, currencies and precious metals

An investor watches a board showing stock information at a brokerage office in Beijing, China October 8, 2018.

An investor watches a board showing stock information at a brokerage office in Beijing, China October 8, 2018.

REUTERS/Jason Lee
  • Asian shares rise as the Fed signals a potential end to its tightening cycle
  • UAE stock markets dropped on Wednesday, dragged lower by banks
  • Oil prices rose on tightening supply
  • Dollar weakens, gold stays near eight-month highs

Global markets

Asian shares tracked early on Thursday a rally on Wall Street overnight, as the United States’ Federal Reserve held interest rates steady as expected and said it would be “patient” before making any further moves.

“The Fed’s statements firmly confirmed its dovish stance, which had already been on display at the start of the year. Market concerns towards the Fed’s rate hikes have now been put to rest,” Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo, told Reuters.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose to its highest since October 4 and was last up 0.7 percent. Overnight on Wall Street, the Dow and the Nasdaq added 1.7 percent and 2.2 percent, respectively.

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Despite lower expectations that the Fed will tighten rates soon, some analysts suggested rate hikes still remained a near-term possibility.

“While many of the risks to the U.S. outlook remain in place, there is little to suggest that the outlook has changed by as much as the Fed communication says it has,” wrote Michael Gapen, chief U.S. economist at Barclays, according to a Reuters report.

“We worry that the Fed has traded near-term support for financial markets and the economy for another round of volatility later this year if it is forced to lift rates higher, which remains more likely than not, in our view.”

Middle East markets

Dubai’s index dropped 1.1 percent on Wednesday with Dubai Islamic Bank, the largest Islamic lender in the United Arab Emirates, dropping 4.4 percent in heavy trade, despite the bank reporting a 15 percent rise in fourth-quarter net profit.

Abu Dhabi's index fell 0.6 percent, with its largest lender First Abu Dhabi Bank shedding 1.2 percent. Abu Dhabi Commercial Bank's shares rose 1.12 percent on Wednesday, while Union National Bank’s shares dropped 1.7 percent, a day after both banks announced that they agreed to merge and for the combined entity to acquire Al Hilal Bank.

Saudi Arabia's index was flat, with Saudi Kayan Petrochemical increasing 3.6 percent and National Company for Glass Industries rising 1.1 percent after its fourth-quarter loss narrowed. 

The Qatari index was also flat, with Commercial Bank losing 0.7 percent.

Egypt’s blue-chip index EGX30 rose 0.8 percent as Global Telecom Holding surged 7.3 percent after its major shareholder, VEON Ltd, said it was considering taking the firm private earlier in the week.

Kuwait’s index added 0.4 percent, Bahrain’s index gained 0.5 percent and Oman’s index was last up 1 percent.

Oil prices

Oil prices rose on Thursday following a report from the U.S. Energy Information Administration (EIA) on Wednesday showing a drop in Saudi crude supply to the United States.

International Brent crude oil futures were up 52 cents, or 0.8 percent, at $62.17 per barrel.

U.S. West Texas Intermediate (WTI) crude futures were at $54.58 per barrel at 0249 GMT, up 35 cents, or 0.7 percent, from their last settlement.

“Crude oil prices were stronger after signs emerged that OPEC cuts are impacting trade. EIA’s weekly report showed that U.S. imports from Saudi Arabia fell by more than half from the previous week to 442,000 barrels per day (bpd). This is the second lowest level in weekly data going back to 2010,” ANZ bank said, according to a Reuters report.

Currencies

The dollar dropped on Thursday as investors shifted to risky assets following the Fed meeting.

The dollar index, which measures the greenback against a basket of six major currencies, fell around 0.1 percent to a three-week low, having already dropped 0.43 percent overnight.

Precious metals

Gold prices steadied near eight-month highs on a weakening dollar.

Spot gold was steady at $1,319.87 per ounce by 0042 GMT. Prices rose to their highest since May 11 at $1,323.34 on Wednesday.

U.S. gold futures were up 0.7 percent at $1,319.30 per ounce.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)


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