Investing.com – Asia Pacific stocks were mostly up on Wednesday morning, with Chinese shares easing a selloff. However, market volatility remains due to the conflict in Ukraine and investors await the U.S. Federal Reserve’s latest policy decision.
Japan’s Nikkei 225 fell 1.67% by 10:34 PM ET (2:34 AM GMT). Wednesday’s trade data showed that exports grew 19.1% year-on-year and imports grew 34% year-on-year in February 2022. The trade balance was –JPY668.3 billion ($5.65 billion), while the adjusted trade balance was –JPY1.03 trillion.
South Korea’s KOSPI gained 0.75% and in Australia, the ASX 200 rose 0.88%.
Hong Kong’s Hang Seng Index jumped 2.51%.
China’s Shanghai Composite was down 0.43% while the Shenzhen Component was up 0.34%. Chinese shares listed in the U.S. also began to slowly climb out from a recent selloff, although fears of a regulatory crackdown and China’s ties to Russia sparking a U.S. backlash continue to weigh on Chinese stocks.
The Fed will hand down its policy decision later in the day, where it is widely expected to hike interest rates. However, further hikes are less certain as the growth risks from Russia’s invasion of Ukraine on Feb. 24 remain.
“The confluence of events leading into this meeting puts policymakers in a very unenviable position,” Nomura Securities International Inc. executive director Matt Rowe told Bloomberg.
“It’s being publicly debated whether if you create a recession to push the number down to 2%, is that actually a policy error?” he added, in reference to inflation.
The Bank of England will hand down its policy decision on Thursday, with the Bank of Japan following a day later. European Central Bank President Christine Lagarde, Executive Board member Isabel Schnabel, Governing Council member Ignazio Visco, and Chief Economist Philip Lane will speak at a conference on Thursday.
Ukraine and Russia will resume talks to end the conflict between the two countries later in the day. Mykhailo Podolyak, an adviser to Ukrainian President Volodymyr Zelenskiy, tweeted that the negotiations are “difficult” but there is room for compromise. However, Russian President Vladimir Putin accused Ukraine’s leadership of not being “serious” about resolving the conflict.
Western sanctions against Russia also remain a risk, with the country highly likely to default as Russian decrees will likely prevent dollar settlements. But Russia also began paying $117 million in interest on dollar bonds.
Meanwhile, Tuesday’s U.S. producer price inflation (PPI) grew 10% year-on-year, and grew 0.8% month-on-month, in February. The core PPI grew 8.4% year-on-year and 0.2% month-on-month. The NY Empire State Manufacturing Index for March was -11.80.
The data compounds the Fed’s dilemma, according to some investors.
“We will be closely watching the Fed’s dot plot, which we expect to signal five or six interest-rate hikes this year, more than December’s projections but in line with market expectations,” New York Life Investments portfolio strategist Lauren Goodwin said in a note.
“A dot plot projecting more hiking would likely be a hawkish signal and could result in an earlier yield curve inversion.”
