Asian shares lower, investors await Fed, BoJ decisions

European shares wobbled while the US dollar held firm on Tuesday as traders braced for a slate of central bank meetings this week that is likely to see the US Federal Reserve deliver a rate cut and the Bank of Japan stand pat for now.

The pan-continental STOXX 600 was down 0.5 per cent, to a two-week low. Germany's DAX, France's CAC 40 and Britain's FTSE 100 were lower by between 0.1 per cent and 0.7 per cent.

"There's not that much to hang your hat on in Europe," said Lars Skovgaard, senior investment strategist at Danske Bank, citing recent poor economic data.

"Santa Claus is definitely coming with a gift for US equity investors but it seems to be that he's riding over the sky in Europe, at least for now."

In Asia, Japan's Nikkei 225 fell 0.2 per cent, while South Korea's Kospi fell 1.3 per cent, taking its yearly losses to over seven per cent, making it Asia's worst performing market this year.

The market has been under pressure amid political turmoil with President Yoon Suk Yeol impeached and suspended from his duties on Saturday over a short-lived attempt to impose martial law.

China's Shanghai Composite index fell 0.73 per cent to 3,361.48 after a choppy session, despite Premier Li Qiang urging government officials to swiftly carry out key economic tasks for the coming year. Hong Kong's Hang Seng index slipped 0.48 per cent to 19,700.48.

Australian markets rose notably to snap a five-day losing streak. The benchmark S&P/ASX 200 jumped 0.78 per cent to 8,314, with financials leading the surge. The broader All Ordinaries index climbed 0.76 per cent to 8,558.60. Commonwealth Bank of Australia, ANZ, and Westpac rose between 0.7 per cent and 1.6 per cent.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 index ended up 0.91 per cent at 12,914.30.

Bitcoin remained nestled near the record high of $US107,821 it touched on Monday, and was last at $US107,346. The crypto market has been on a tear since the US election in early November as traders bet the incoming Trump administration will bring a friendlier regulatory environment.

Central banks in the United States, Japan, UK, Sweden, Norway, Indonesia and Thailand all meet this week, with the BOJ, the Bank of England, Norges Bank and Bank of Thailand expected to stand pat, while the Riksbank is seen cutting rates.

Bank Indonesia on the other hand is expected to hike interest rates to support the rupiah, which is rooted near its lowest in four months.

The spotlight will be on the Fed and especially on the projection for next year with markets pencilling in a 25-basis- point cut on Wednesday.

After the expected cut this week, markets are pricing in a further 45 basis points of easing in 2025, equal to one quarter-point cut and around an 80 per cent chance of a second.

Charu Chanana, chief investment strategist at Saxo, said the market will be watching for any signs of a "hawkish cut" on Wednesday.

"This means that while the Fed is easing policy, it could signal caution about the pace of future cuts, either through the committee's updated dot plot or via Chair Powell's press conference."

The previous dot plot indicated four rate cuts (100 bps) for 2025, but this could be revised to just three or even two cuts as inflation risks remain elevated, Chanana said.

The dollar index, which measures the US currency against six rivals, was up 0.2 per cent 106.99 and on course for five per cent gain for the year.

The yen last fetched 153.84 per dollar after touching a three week low against the dollar on Monday. It has been on the defensive as chances of a hike from the BOJ this week remained slim, with a majority of economists polled by Reuters expecting the central bank to hold interest rates.

In other currencies, the euro stood at $US1.0490, on course for a near five per cent drop in 2024. Sterling was up 0.1 per cent after hotter-than-forecast pay growth in the three months to October.

"Today's data will strengthen the Bank's narrative of gradualism and caution as we head into the new year," said Sanjay Raja, Deutsche Bank's chief UK economist, who already expected the BoE to hold rates on Thursday.

In commodities, oil prices were soft as investors fretted about Chinese demand ahead of the Fed meeting.

US West Texas Intermediate crude was down one per cent at $US70.04 a barrel, while Brent crude futures eased 0.8 per cent to $US73.34 a barrel.

Spot gold was 0.2 per cent lower at $US2,647 per ounce, on course for 29 per cent rise in 2024, its strongest year since 2010.

with DPA