Asia shares in waiting mode ahead of Fed, ECB events

SYDNEY (Reuters) – Asian share markets got the week off to a muted start on Monday as jaded investors awaited real evidence on progress in the U.S.-China trade dispute, though sentiment found support from another record close on Wall Street.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dipped 0.06% in very light volumes.

Japan’s Nikkei .N225 added 0.05%, but remained short of its recent 13-month top. E-Mini futures for the S&P 500 ESc1 eased 0.1%, though that was from historic highs.

Doubts about Sino-U.S. trade talks emerged early last week, although optimism gradually returned as U.S. officials sounded more positive.

On Saturday, Chinese state media said the two sides had “constructive talks” on trade in a high-level phone call that included Vice Premier Liu He, U.S. trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

“Markets remain at risk of further short-term volatility given issues around trade, Iran & the Middle East, impeachment noise and weak global economic data,” said Shane Oliver head of investment strategy and chief economist at AMP Capital.

“But valuations are okay – particularly against low bond yields – global growth indicators are expected to improve through next year and monetary and fiscal policy are becoming more supportive.”

Wall Street’s main indexes closed at record levels on Friday as the S&P 500 scored its sixth straight week of gains. The Dow .DJI ended Friday up 0.8%, while the S&P 500 .SPX made 0.77% and the Nasdaq .IXIC 0.73%. [.N]

WAITING ON THE FED

In currency markets, the dollar was little changed against its main peers on Monday and well within recent tight trading ranges. Indeed, volatility in the market has been the lowest in decades recently and shows no sign of shifting.

The dollar was steady on the yen at 108.72 JPY=, after bouncing on Friday. Chart support lies at 108.23 with stiff resistance at 109.48.

The euro, likewise, idled at $1.1054 EUR= having found support at $1.0987 last week. Investors are awaiting the first major speech by European Central Bank President Christine Lagarde due on Friday for clues on future policy.

Sterling nudged up to $1.2916 GBP=D3 as more polls showed the Tories well ahead in the election race.

Against a basket of currencies, the dollar was a shade softer at 97.954 .DXY.

The dollar and bonds are likely to be sensitive to minutes of the Federal Reserve’s last policy meeting, set to be released on Wednesday.

“The minutes are likely to reiterate that the U.S. economy is ‘solid’ and that current monetary policy settings are ‘appropriate’, which would support the dollar,” said Joseph Capurso, a currency analyst at Commonwealth Bank of Australia.

However, he noted the soft report on October U.S. retail sales released on Friday suggested previously strong consumption was showing some cracks.

“Any further weakness in consumption could warrant a material reassessment of the outlook by the FOMC.  Under our baseline, the FOMC would most likely start cutting interest rates again in 2020,” said Capurso.

Spot gold was flat at $1,468.45 per ounce XAU= as it tracks every passing twitch in risk appetite.

Oil prices were supported after Brent touched a seven-week high on Friday. [O/R]

In early trade, Brent crude LCOc1 futures firmed 2 cents to $63.32, while U.S. crude CLc1 added 3 cents to $57.75 a barrel.