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Asian Shares Higher Ahead of BOJ Decisions; Aussie Index Hits Record High

James Hyerczyk

Asia Pacific shares are trading higher early Tuesday as traders await the release of today’s Bank of Japan policy and interest rate decisions and Wednesday’s U.S. Federal Reserve’s widely expected 25-basis point rate cut.

Investors are also awaiting any information on the outcome of the trade talks between the United States and China although the odds of a quick resolution to the lingering trade dispute are low. Hong Kong investors are recouping some of Monday’s losses, but the chaos in the city continues.

At 03:31 GMT, Japan’s Nikkei 225 Index is trading 21763.38, up 146.58 or +0.68 percent. Hong Kong’s Hang Seng Index is at 28249.62, up 143.21 or +0.51 and South Korea’s KOSPI is at 2041.47, up 11.99 or +0.59 percent.

In China, the Shanghai Index is trading 2959.50, up 18.49 or +0.63 percent and Australia’s S&P/ASX 200 is at 6845.80, up 20.00 or +0.29 percent.

Bank of Japan

The Bank of Japan is widely expected to leave monetary policy unchanged and reiterate its current aggressive easing stance. This report carries event risk because some analysts believe the BOJ could tweak policy, or suggest that more stimulus was coming in the future. If central bank policymakers are more dovish then expected then the Japanese Yen could weaken.

Bloomberg Thoughts

“Some 81% of 47 economists surveyed by Bloomberg see the BOJ sticking with its current policy settings at the meeting, while 19% predict additional easing. The meeting comes the day before the Fed is widely expected to cut U.S. interest rates for the first time in more than a decade.”

“While the vast majority of analysts think the BOJ will want to conserve its scarce firepower for now, a key focus will be the BOJ’s stance on future policy. Roughly a third of polled analysts expect the bank to strengthen its pledge to keep rates at extremely low levels at the meeting.”

“We think the BOJ will adopt a wait-and-see strategy ahead of the Federal Reserve’s decision on July 31… The BOJ’s latest growth and inflation outlook and any tweaks to its forward guidance will be a focus.”

Hong Kong Protests

The Hong Kong Hang Seng Index is trading higher on Tuesday, but the chaos disrupting the city ability to function as a key international business center continues. According to reports, hundreds of Hong Kong protesters blocked train services during the early morning run hour, causing commuter chaos in the latest anti-government campaign to roil the former British colony.

China on Monday reiterated its support for Hong Kong’s embattled leader, Carrie Lam, and its police and urged Hong Kong residents to oppose violence.

Aussie Stock Market Hits Record High

Australia’s ASX 200 rose sharply at the opening bell on Tuesday, to hit levels not seen in more than 11 years, or before the global financial crisis. While Australia’s economy has avoided a recession for 28 years, it’s been kept afloat by government stimulus, a bank guarantee and booming iron ore and coal prices. Meanwhile, the market has been slower to recover than those in the U.S. and Asia. In early July, the Reserve Bank of Australia (RBA) cut interest rates to a record low of 1% to stimulate an economy that, despite high commodity prices, remains anemic. Last week, RBA Governor Philip Lowe pledged to keep interest rates at record lows for a prolonged period of time.

This article was originally posted on FX Empire