Markets fluctuated Wednesday as investors kept a nervous eye on Washington this week, hoping the Federal Reserve will pledge to press ahead with its dovish monetary policy, while lawmakers are struggling to hammer out a much-needed new stimulus package.
Gold prices held steady after hitting record highs for two straight days, though observers say ongoing uncertainty over the spread of coronavirus, the weaker dollar and geopolitical worries could push the yellow metal above $2,000 soon.
With the disease showing little sign of being fully controlled until a vaccine is created, economic recoveries and a months-long global markets rally are sputtering, putting pressure on governments and central banks to add to their already monumental financial support.
The Federal Reserve concludes its latest policy meeting later in the day, and while it is not expected to announce any new measures, there are hopes it will offer new guarantees that it will keep the stimulus in place for an extended period.
The bank dropped interest rates to zero in the early days of the pandemic, and said they will stay there until the recovery is firmly in place, while it has also flooded the financial system with cash and constructed a web of loan programmes for businesses, as well as state and local governments.
"Today's outcome is huge for risk as there is no disguising the fact that a lot is riding on the market reaction to the (policy meeting) when it comes to setting the general tone for risk sentiment over the rest of the summer," said Stephen Innes of AxiCorp.
"And it is possibly the biggest curtain warmer to the most critical fourth quarter for stock markets ever."
Hong Kong, Shanghai, Seoul, Taipei and Wellington were all in positive territory, while Tokyo, Sydney, Singapore, Manila and Jakarta were slightly lower, with trading floor caution seeing most markets swing to and fro.
Wall Street provided a weak lead, with traders spooked by below-par earnings from top firms, particularly McDonald's, which saw a steep drop in profits owing to poor sales.
Analysts said world markets would struggle to build on the strong gains seen since their March bottom.
"There’s enough stimulus and support in the market from a monetary policy perspective, but also from fiscal, and that keeps a nice floor under the market," said Amanda Agati at PNC Financial Services Group.
"But we also think it’s going to be very difficult to make a lot of forward progress in this environment."
There are concerns about US lawmakers' struggle to push through a new support programme for the world's top economy, with their previous multi-trillion-dollar scheme running dry.
Senate Republicans have unveiled a $1 trillion plan that slashes additional jobless benefits by two-thirds but offers another $1,200 payment to individuals and gives funding to schools, provided they reopen.
That is less than a third of the bill passed by House Democrats, and there are worries the haggling could string out as Americans are left reeling. The need for a deal is made all the more important as Congress is due to go into recess next month.
However, with elections less than 100 days away, National Australia Bank's Tapas Strickland said: "We doubt many senators or representatives want to hit the campaign trail empty-handed."
The wave of cash being pumped into the system, as well as worries about the still-high US virus infection rate, has sent the dollar skidding against most other currencies and helped push safe-haven gold to record highs.
"When extremely dovish Fed policy expectations get juxtaposed against rising geopolitical tensions, elevated US domestic political and social discord, and a growing second wave of COVID-19 related infections, it beckons the need for gold as an ultimate hedge," Innes added.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: DOWN 0.8 percent at 22,479.05 (break)
Hong Kong – Hang Seng: UP 0.3 percent at 24,848.84
Shanghai – Composite: UP 0.6 percent at 3,246.46
Gold: UP 1.2 percent at $1,952.00 per ounce
Euro/dollar: DOWN at $1.1714 from $1.1721 at 2110 GMT
Dollar/yen: DOWN at 105.05 yen from 105.09 yen
Pound/dollar: DOWN at $1.2921 from $1.2932
Euro/pound: UP at 90.71 pence from 90.61 pence
West Texas Intermediate: DOWN 0.1 percent at $41.00 per barrel
Brent North Sea crude: UP 0.1 percent at $43.27 per barrel
New York – Dow: DOWN 0.8 percent at 26,379.28 (close)
London – FTSE 100: UP 0.4 percent at 6,129.26 (close)