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GLOBAL MARKETS-Asian shares climb on dovish Fed, but Brexit hurdle looms

Published 12/12/2019, 03:40
Updated 12/12/2019, 03:45
© Reuters.  GLOBAL MARKETS-Asian shares climb on dovish Fed, but Brexit hurdle looms
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* Asian stock markets: https://tmsnrt.rs/2zpUAr4

* Traders around the world brace for British election

* Trump to meet advisers on China tariffs

* Dovish Powell comments hurt dollar

* Treasury yields rebound in Asia

By Stanley White

TOKYO, Dec 12 (Reuters) - Asian stocks rose on Thursday to

the highest in a month after the Federal Reserve signalled rate

settings were likely to remain accommodative, but the imminent

UK election and a deadline for Sino-U.S. trade talks kept

investors cautious.

The Fed kept interest rates unchanged, as expected, at its

policy meeting on Wednesday but indicated interest rates would

remain on hold, which nudged Wall Street stocks higher.

That helped MSCI's broadest index of Asia-Pacific shares

outside Japan .MIAPJ0000PUS climb 0.8% to the highest since

Nov. 11. Japan's Nikkei stock index .N225 rose 0.18% and U.S.

stock futures ESc1 edged up 0.1%. Australian shares .AXJO

were down 0.7%, however, weighed by the financial sector after a

money-laundering scandal.

"The Fed's accommodative stance does support equities, but

the chance of a disruptive election outcome in Britain is very

real," said Michael McCarthy, chief market strategist at CMC

Markets in Sydney.

"You also have the U.S.-China trade problem. We're likely to

see subdued trading and some investors may lock in profits as

the day progresses."

The S&P 500 .SPX rose 0.29% on Wednesday after the Fed's

rate decision, which included enough dovish tones to cheer

markets.

Traders are bracing for a series of make-or-break events

over the next few days that have the potential to cause huge

swings in financial markets for months to come.

Sterling traded near the highest in more than two years

versus the euro and close to an eight-month high versus the

dollar before voting begins in an election that will determine

whether Britain exits the European Union in an orderly fashion.

Polls show the Conservatives' lead shrinking ahead of an

election starting later on Thursday, which could jeopardise

chances of a smooth Brexit.

Exit polls for Britain's election will begin around 2200 GMT

after voting closes, then official results will begin to trickle

UK Prime Minister Boris Johnson's ruling Conservative Party

is running on a pledge to enact a swift split from the EU,

ending more than three years of uncertainty.

Traders say a hung parliament or a victory for the main

opposition Labour Party could cause huge disruptions because

Labour is promising another referendum on membership of the

bloc. Against the euro, sterling EURGBP=D3 rose 0.1% to 84.26

pence, close to its firmest level since May 2017. The pound

GBP=D3 rose 0.2% to $1.3225, just shy of its highest since

March.

The euro EUR=EBS traded at $1.11405, close to a five-week

high before a European Central Bank meeting later on Thursday

where policymakers are expected to keep rates on hold.

Chinese shares .CSI300 slipped 0.06%. Activity was subdued

as investors awaited more news about the Sino-U.S. trade war.

U.S. President Donald Trump is expected to meet Thursday

with top advisers to discuss tariffs on nearly $160 billion of

Chinese consumer goods that are scheduled to take effect on Dec.

15, three sources told Reuters. Trump is expected to go ahead with the tariffs, a separate

source told Reuters, which could scuttle efforts to end a

17-month long trade dispute between the world's two-largest

economies.

The dollar index .DXY against a basket of six major

currencies fell 0.35% to 97.076, approaching a four-month low

reached on Wednesday after Powell it would take a significant

pick-up in inflation to cause the Fed to raise rates.

Treasury yields initially fell in reaction to Powell's

comments, but they rebounded slightly in Asia. The yield on

benchmark 10-year Treasury notes US10YT=RR rose to 1.8017%.

U.S. crude CLc1 edged up 0.24% to $58.90 a barrel. Brent

crude LCOc1 rose 0.46% to $64.01 per barrel. A report by OPEC

released on Wednesday suggested that oil markets are tighter

than previously thought. Traders are also focused on state oil company Saudi Aramco

2222.SE , whose shares surged the maximum permitted 10% above

their IPO price on their Riyadh stock market debut on Wednesday,

making it the world's most valuable listed company.

(Editing by Sam Holmes and Jacqueline Wong)

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