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Asian markets post early gains as investors brace for US Federal Reserve policy meeting
Source: David Gray/Reuters
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  • Capital markets in Asia posted moderate gains early on Tuesday as investors look to the upcoming US Federal Reserve policy meeting
  • The ASX has been a major driver, jumping 1.03 per cent while Chinese blue chips and Hong Kong both fell
  • Both the S&P 500 and the NASDAQ closed at record highs as the Dow Jones Industrial Average fell 0.25 per cent
  • Investors will know on Thursday if the Fed plans to roll back its bond buying program
  • Almost 60 per cent of economists that participated in a recent Reuters poll expect a taper announcement to come in the next quarter

Capital markets in Asia posted moderate gains in early trading on Tuesday as investors look to the much-anticipated US Federal Reserve policy meeting to see if the central bank would make any changes to its monetary policy outlook.

Japan's Nikkei rose 0.89 per cent while MSCI's broadest index of Asia-Pacific shares outside of Japan was up 0.23 per cent.

One of the early drivers was the ASX, which jumped 1.03 per cent, although Chinese blue chips dropped 0.16 per cent and Hong Kong fell 0.21 per cent. All three exchanges resumed trading after being shut down for a public holiday on Monday.

In the US, both the S&P 500 and the NASDAQ closed at record highs, boosted by big tech names, while the Dow Jones Industrial Average fell 0.25 per cent.

"We are still getting markets responding positively to the lower volatility in the bond markets and lower yields, and a sense that inflation will be reasonably temporary and the Fed won't have to slam the brakes on," said Kyle Rodda, market analyst at brokerage IG.

"I suspect in the next 24-48 hours we'll see a lot of chop, first on the upside, then a little correction as the market positions itself, and then we're off to the races if we get the green light from the Fed Thursday morning."

Investors will be paying close attention to the final statement from the two-day meeting, which begins on Tuesday, regarding if and when the Fed plans to roll back its bond buying program, amid concerns about inflation as the US economy bounces back from a COVID-induced slump.

Almost 60 per cent of economists that participated in a recent Reuters poll expect a taper announcement to come in the next quarter, despite a mixed recovery in the job market.

"Whilst no immediate changes in monetary policy are anticipated, an increase in the share of FOMC members who think rates will need to increase in 2023 is expected," analysts at ANZ wrote in a note to clients.

"If three more members pencil in rate rises for 2023, that would tip the majority in favour of moving rates relatively soon."

As for commodities, US crude rose 0.55 per cent to US$71.27 (A$92.52) a barrel, and Brent crude was at US$73.24 (A$95.08) per barrel having touched US$73.64 (A$95.60) a barrel on Monday — its highest since April 2019.

Spot gold was down slightly at US$1862.21 (A$2417.45) per ounce.

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