Markets mostly down in holiday-thinned Asia trade, eyes on Fed

HONG KONG: Asian markets struggled Monday during holiday-hit trade, with investors looking forward to the Federal Reserve's next meeting this week hoping for fresh clues about monetary policy in light of the US economy's blistering recovery.

Another record close for the S&P 500 on Wall Street on Friday provided a healthy lead for the region, though with holidays in Hong Kong, China and Australia, business was light.

Confidence among investors remains high as vaccine rollouts, the easing of containment measures, central bank largesse and government stimulus provide support, with observers forecasting a rally that began in April 2020 will continue into next year.

US data showing inflation far higher than expected last month was taken in stride as markets appear to have accepted Fed insistence that the spike will be temporary and their ultra-loose monetary policies -- including record low interest rates -- will be maintained for the foreseeable future.

There had been a worry that soaring prices would force the bank to taper its bond-buying scheme earlier than first thought.

Still, this week's meeting will be closely followed for an idea about its plans.

Mansoor Mohi-uddin, chief economist at the Bank of Singapore, said it is not expected to announce any change at the end of the gathering Wednesday, but it is "likely to start discussing when it will begin slowing its quantitative easing, given the US economy's strong rebound from the pandemic".

"But its taper talk will last many months with the Fed stressing that it needs to see 'substantial further progress' towards meeting its goals of maximum employment and stable inflation before it will slow its asset purchases.

"We expect the Fed will wait until as late as December before announcing it will start tapering in early 2022."

Tokyo stocks ended the morning session up 0.6 percent, while there were also gains in Jakarta, but Singapore, Seoul, Wellington and Manila fell.

Oil prices extended Friday's gains on demand optimism as the global recovery progresses, with WTI at a three-year high and Brent around levels not seen since mid-2019.

Bitcoin surged to within touching distance of $40,000 for the first time in more than two weeks after Elon Musk said at the weekend that Tesla would accept payments in the unit again when it is mined using cleaner energy.

"When there's confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions," the billionaire tweeted Sunday.

The electric car maker said in February that customers could use cryptocurrency, sending bitcoin surging, before Musk changed his mind citing environmental concerns.

Bitcoins are produced by powerful computers that have to solve equations and consume huge amounts of electricity in the process.

Key figures at 0230 GMT

Tokyo - Nikkei 225: UP 0.6 percent at 29,109.52 (break)

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

Euro/dollar: DOWN at $1.2104 from $1.2109 at 2050 GMT on Friday

Pound/dollar: UP at $1.4117 from $1.4113

Dollar/yen: UP at 109.72 yen from 109.66 yen

West Texas Intermediate: UP 0.4 percent at $71.20 per barrel

Brent North Sea crude: UP 0.4 percent at $72.98 per barrel

New York - Dow: FLAT at 34,479.60 (close)

London - FTSE 100: UP 0.7 percent at 7,134.06 (close)