Asian shares up on Fed optimism, sterling firms ahead of expected BOE hike

Asian Stock Markets

Asian shares inched higher on Thursday after the U.S. Federal Reserve said economic growth was solid, virtually cementing the case for a December rate rise even as investors braced for what is expected to be the Bank of England’s first hike in more than 10 years.

Futures hinted at weaker openings for European bourses, with European stock futures STXEc1 down 0.2 percent while Dax futures FDXc1 and FTSE futures FFIc1 each shed 0.3 percent. CAC futures FCEc1 down 0.1 percent. 

Investors were wary as they awaited the nomination of the next head of the U.S. central bank, as well as a tax bill from squabbling Republicans in the U.S. House of Representatives. Both were expected later in the session. 

After a one-day delay, the tax plan is said to include $6 trillion in tax cuts over 10 years but is unlikely to define how these would be offset as Republicans remain split over how to pay for them.

The BoE is expected to raise rates later in the session (1200 GMT) to tamp down inflation, which has picked up to a five-year high despite weakening economic growth. 

But most economists polled by Reuters say a rate hike now would be a mistake as uncertainty builds ahead of Britain’s planned departure from the EU in March 2019. 

Sterling firmed 0.2 percent to $1.3282 GBP=D3 ahead of the decision. U.S. S&P e-mini futures ESc1 were down 0.2 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was nearly flat in late afternoon trade, after earlier climbing to its highest levels since November 2007. 

Australian shares touched a two-and-a-half year high in early trade but reversed gains to close down 0.1 percent.

China's blue-chip CSI300 index .CSI300 was down 0.2 percent, while the Shanghai Composite Index .SSEC shed 0.4 percent. 

Japan's Nikkei stock index .N225 finished up 0.5 percent at its highest close since late June 1996, gaining 2.4 percent in a holiday-shortened week. Japanese markets will be closed for a national holiday on Friday. 

The White House plans to nominate current Fed Governor Jerome Powell as the next chair when Janet Yellen’s term expires in February, a source familiar with the matter said on Wednesday.