Japanese Stock Futures Advance as Fed Meeting Draws to a Close

Japanese stock futures and Australian equities rose amid speculation the Federal Reserve will step up monetary policy easing when it concludes a meeting today and as investors weighed progress in U.S. budget talks.

American Depositary Receipts of Japanese auto exporter Toyota Motor Corp. gained 0.6 percent. Those of Canon Inc. (7751) gained 2.5 percent after the Nikkei newspaper reported the camera maker will cut costs by as much as 80 billion yen ($970 million) next year. BHP Billiton Ltd. (BHP), the world’s largest mining company, rose 1.2 percent in Sydney after agreeing to sell its stake in a liquefied natural gas project in Western Australia to PetroChina Co. for $1.63 billion.

Futures on Japan’s Nikkei 225 Stock Average expiring this month closed at 9,595 in Chicago yesterday, up from 9,520 in Osaka, Japan. They were bid in the pre-market at 9,580 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index gained 0.5 percent and New Zealand’s NZX 50 Index fell 0.5 percent.

“The Fed is expected to announce QE4, or effectively $45 billion a month buying of U.S. treasuries to replace its expiring Operation Twist,” said Cameron Peacock, Melbourne- based market strategist at IG Markets Ltd., a provider of trading services in equities, currencies and commodities. “In theory, there shouldn’t be a huge reaction to news that the Fed is initiating this program given it has been speculated on for some time and should be priced in. Look for a sizeable negative reaction if the Fed either does a smaller size or delays the program until the New Year.”

Fed Meeting

Fed officials are considering whether to supplement $40 billion a month of mortgage-bond buying with purchases of Treasuries when their Operation Twist program expires at the end of the month. A two-day meeting concluding today will be followed by statements on the economy and monetary policy.

Dealers who trade with the Fed expect the central bank will begin buying as much as $45 billion a month in Treasuries at its Dec. 12 meeting and keep benchmark interest rates about zero into 2015, Bloomberg surveys show.

U.S. lawmakers need to agree on a budget to prevent more than $600 billion of automatic tax increases and spending cuts from coming into effect next year.

Futures on the Standard & Poor’s 500 Index fell 0.1 percent today. The S&P 500 gained 0.7 percent yesterday as German investor confidence climbed and traders awaited progress on federal budget negotiations in Washington.

The MSCI Asia Pacific (MXAP) Index advanced 11 percent this year through yesterday and is trading at its highest level since April as central banks took steps to support economic growth. The gauge traded at 14.2 times estimated earnings, compared with 13.8 times for the S&P 500 Index and 12.6 times for the Stoxx Europe 600.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. gained 0.5 percent yesterday in New York, a fifth day of gains.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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