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China rout slows, investor focus on Fed

Global equities have regained some poise as a storm in Chinese stocks showed signs of easing, while the dollar made modest gains as investors awaited a Federal Reserve meeting.

After a wave of heavy selling in recent days on the back of broadening regulatory crackdowns in China, Chinese blue chips closed up 0.2 per cent, but the Shanghai Composite Index ended 0.6 per cent down, its lowest close since March 10.

Hong Kong’s benchmark added 1.5 per cent, but remained near nine-month lows.

Chinese state-run financial media urged calm on Wednesday after a roiling of stocks in the technology, property and education sectors in recent days.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.3 per cent firmer after three straight sessions of losses.

In Europe, the pan-continent STOXX 600 index added 0.2 per cent, helped by encouraging earnings reports.

German lender Deutsche Bank gained 3.9 per cent after delivering a better-than-expected quarterly profit. Britain’s Barclays jumped 4.0 per cent as it announced resumption of shareholder payouts after beating first-half profit expectations.

US stock futures, the S&P 500 e-minis, were 0.1 per cent lower.

Market movements were small ahead of the Fed meeting. Investors are primed for any hints on when the central bank will start reducing its purchases of government bonds and any fresh insight into its views on inflation and economic growth.

“In the background, you have the ripple effect of the Chinese crackdown and a lot of companies reporting today, but the Fed is the major event,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.

“Are we going to get a timetable on tapering? Is it going to be clearly announced?”

The statement from the Fed policy meeting is due at 2 pm EDT (1800 GMT), with a news conference by Chairman Jerome Powell expected half an hour later.

With investors holding off on major bets ahead of the meeting, the dollar made marginal gains after earlier being pinned down by demand for safe-haven currencies.

The US dollar index moved into positive territory after trading lower in Asian hours, with the greenback last up 0.1 per cent at 92.534.

The Chinese yuan edged back from three-month lows and its worst day since October on Tuesday.

The yield on benchmark 10-year Treasury notes strengthened to 1.2590 per cent, up from the US close of 1.234 per cent.

Oil prices rose as industry data showed US crude and product inventories fell more sharply than expected last week, outweighing worries that surging COVID-19 cases would curb fuel demand.

US crude rose 0.29 per cent to $71.86 a barrel and Brent crude rose 0.15 per cent to $74.61 per barrel.

Gold drew support from fragile equities and a subdued dollar, with spot prices above the key psychological level of $1,800, while Bitcoin rose around 0.8 per cent, trading just below $40,000.

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