SYDNEY Asian share markets should take heart from record highs in U.S. stocks on Wednesday as investors wager the Federal Reserve will rock no boats at its policy meeting and leave stimulus in place for the next few months at least.
Australia was the first market to dip its toe in the water, gaining 0.5 percent , while MSCI's index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was a shade firmer.
A mixed bag of U.S. economic data caused few frowns since it merely reinforced expectations the central bank will maintain to the status quo when its two-day policy meeting ends on Wednesday.
Even the U.S. dollar got a lift as dealers gauged the prospect of easy money for longer had now been pretty much discounted following two months of losses.
Markets seem to be operating on the assumption that the Fed's policy statement will not challenge the growing consensus that any tapering of its $85 billion of monthly asset purchases will not start until March at the earliest.
Such an outcome would be taken as justifying the rallies in stocks and bonds seen in recent weeks and might have only a limited impact on prices in the near term.
But it also means markets are vulnerable to a surprise.
"With expectations of taper firmly kicked into 2014 the risk that the FOMC could decide to move earlier looks asymmetrical," said Patrick Perret-Greene, an analyst at Australia and New Zealand Bank.
"If the Fed does nothing tomorrow then nothing really happens but if they do something or even hint at moves in the not too distant future the effects could be dramatic."
The Fed's decision is due at 1800 GMT, though divining its true message may be tricky as no new economic forecasts are released and nor will Chairman Ben Bernanke be giving a news conference.
BE BORING, PLEASE
For now, markets are hoping the Fed will be boring.
The Dow Jones industrial average .DJI ended Tuesday 0.72 percent higher at an all-time closing peak of 15,680.35.
The S&P 500 .SPX gained 0.56 percent aided further by a jump in heavyweight IBM (IBM.N) after the company's board of directors approved another $15 billion for stock buy-backs.
Among the U.S. data, a measure of core retail sales showed surprising resilience in September, yet a grim survey of consumers highlighted the heavy toll the government shutdown had taken on the public mood.
MSCI's world equity index .MIWD00000PUS rose 0.25 percent On Tuesday, but remained within last week's trading range.
Having fallen steadily since the last Fed meeting, the U.S. dollar seems to have reached a bottom in the last few days.
The dollar index reached a one-week peak of 79.618.DXY, having climbed 0.5 percent on Tuesday. Just last Friday, it had plumbed a nine-month low at 78.998.
"Fed meetings have not been friendly to the USD this year, with the dollar weakening following every meeting in 2013 with the exception of June," analysts at BNP Paribas wrote in a client note.
"However, with markets already having adjusted to a much more dovish view on the Fed outlook, we think the USD is likely to hold up better this time."
The euro slipped to $1.3746, pulling further away from a 23-month peak of $1.3833 set just a few days ago.
Yields on the benchmark 10-year Treasury note were at 2.505 percent after dipping from a high of 2.5360 on Tuesday. The market has enjoyed a substantial rally in the past two months with yields falling all the way from 3 percent.
Spot gold edged back to $1,343.64 an ounce as the dollar gained, but is still up more than 7 percent from a three-month low hit mid-October. <GOL/>
U.S. crude oil was off 67 cents at $97.53 a barrel. <O/R>. Traders termed this a consolidation after a sharp gain on Monday when reports of a sharp drop in Libyan oil exports rekindled worries over global supply.
(Editing by Eric Meijer) To read Reuters Global Investing Blog click here; for the Macro Scope Blog click on blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on blogs.reuters.com/hedgehub)