AFP - Asian equity traders moved cautiously yesterday as another record close on Wall Street was offset by wariness ahead of Central Bank meetings in Japan and the United States this week.
The bank policymakers’ gatherings are the first since last month’s shock vote in Britain to leave the European Union, which led to promises around the world to provide support to financial markets.
The pledges have fanned a surge across global markets, with the Dow and S&P 500 in New York both enjoying a series of records, while strong US data has also boosted the dollar as talk of another interest rate hike resurfaces.
The Bank of Japan is widely expected to ramp up its stimulus to kickstart the struggling economy, although hoped-for helicopter money -- the direct injection of cash into the economy such as people’s bank accounts -- is not expected to feature. Before that, the Federal Reserve will have its meeting, at which it is tipped to hold rates, but traders will be hoping for some forward guidance on its policy plans. “Investors are placing a lot of faith in central banks and fiscal authorities to increase stimulus and improve the growth calculus,” Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, said in an e-mail to clients.
“Equity valuations are stretched but unlike bonds they are not yet at historic extremes and given that it has historically taken three rate hikes to burst equity asset bubbles, share prices should remain elevated for a while yet.”