Asian shares mixed as investors await Fed decision

Global shares and the US dollar edged up on Wednesday as investors made last-minute adjustments to portfolios in the countdown to the year's final flurry of central bank meetings, while news of a potential Nissan-Honda tie-up lifted car stocks.

The dollar traded at multi-month, and even multi-year, highs against a range of currencies, including the Australian, New Zealand and Canadian dollars, ahead of the US Federal Reserve's decision on interest rates later in the day.

The Fed is expected to cut rates by a quarter point, but to signal a cautious approach to loosening monetary policy next year.

S&P 500 futures were up 0.2 per cent, suggesting a small rise at the opening bell later.

Traders are almost certain the Fed will move the funds rate window 25 basis points lower - from its current 4.5-4.75 per cent range - but lift its long-run interest rate projections.

"Markets will focus on two things. The key message has been telegraphed: you'll certainly get a cut. But you'll get a 'hawkish cut', in the sense that they will communicate and guide for a slower pace of cutting to a higher terminal rate," Samy Chaar, economist at Lombard Odier in Geneva, said.

Chaar said his expectation was for a revision to the so-called dot plot - Fed policymakers' quarterly economic projections, including rate forecasts - to show rates levelling out around four per cent, rather than the 3.5 per cent markets have priced in, meaning quarterly cuts from the Fed, rather than meeting-by-meeting cuts.

In the last update in September, Fed members' median projection for rates was for 3.4 per cent at the end of next year and for a long-run neutral rate of 2.9 per cent - well below current market estimates for a long-term neutral rate of around 3.8 per cent.

Traders have been driving up US yields and the dollar accordingly, with benchmark 10-year yields touching one-month highs around 4.4 per cent overnight, before settling at 4.39 per cent.

The US dollar has risen 1.13 per cent against a basket of six other currencies this month. December is typically the weakest month of the year for returns for the US currency, as investors tend to tidy up their positions ahead of the end of the year.

This year is the dollar's strongest performance for a December since 2014.

Meanwhile Asian stocks ended mixed in cautious trade on Wednesday.

Japanese markets fell notably, heading into Thursday's BoJ interest-rate decision. The central bank is likely to keep its benchmark interest rate unchanged as it awaits greater clarity on domestic wages and spending trends, as well as policy changes by US President-elect Donald Trump.

The Nikkei dropped 0.72 per cent to 39,081.71, while the broader Topix index settled 0.31 per cent lower at 2,719.87.

China's Shanghai Composite index rose 0.62 per cent to 3,382.21 after reports emerged that China plans a record budget deficit for 2025 and the State-owned Assets Supervision and Administration Commission (SASAC) has urged state-owned firms to improve market value management of listed companies.

Hong Kong's Hang Seng index jumped 0.83 per cent to close at 19,864.55 on hopes that Chinese stimulus measures will help spur consumption.

Australian markets ended on a flat note after a choppy session. Health-care stocks gained ground, offsetting losses among energy stocks and gold miners. Insignia Financial slumped 4.2 per cent after the money manager rejected Bain Capital's $A2.67 billion takeover bid.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 index slipped 0.38 per cent to end at 12,865.55. Investors shrugged off the result of a survey that showed a measure of NZ's consumer confidence improved in the fourth quarter to reach its highest level in three years.

The euro was mostly steady on the day at $US1.04925, while the yen weakened, leaving the US dollar up 0.15 per cent at 153.68.

Sterling dipped after data showed UK consumer inflation rose a touch more than expected in November. The pound rallied on Tuesday after a separate report showed an unexpected pickup in British wages, which already watered down expectations for interest rate cuts next year.

The Bank of England meets on Thursday and is not expected to make any changes to monetary policy. Markets are pricing in around two quarter-point cuts next year.

Beyond currencies, automaker stocks were in focus in Europe, after two people said Japanese rivals Honda and Nissan were in talks to deepen their ties, including a possible merger.

French manufacturer Renault was the stand-out performer, rising more than six per cent, as the company owns a large stake in Nissan. Paris' CAC 40 was up 0.2 per cent, roughly in line with the STOXX 600

Oil prices edged up ahead of the anticipated rate cut from the Fed later. Lower borrowing costs can stimulate demand for fuels. Brent crude was up 0.5 per cent at $US73.57 a barrel.

with DPA