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Asian stocks follow Wall Street higher after Fed pledge

Asian stocks follow Wall Street higher after Fed pledge

26-Feb-2021 Intellasia | AP | 7:31 AM Print This Post

Asian stock markets followed Wall Street higher Thursday after the Federal Reserve chair said the US central bank is in no hurry to withdraw support for the economy.

Shanghai, Tokyo, Hong Kong and Seoul all advanced.

Overnight, Wall Street hit a new high after chair Jerome Powell said the Fed sees no sign inflation might rise out of control. That helped to dampen fears sparked by a rise in US Treasury bond yields, an indicator of inflation sentiment, that rising price pressure might lead the Fed to raise interest rates.

“Powell has again been pouring oil on troubled markets and making some very sensible distinctions between price level rises and inflation,” said Robert Carnell of ING in a report. “But the Fed still has communication issues over its future policies which could emerge as a tantrum some way down the line.”

The Shanghai Composite Index rose 0.9 percent to 3,597.01 and the Nikkei 225 in Tokyo gained 1.5 percent to 30,125.89.

The Hang Seng in Hong Kong advanced 2 percent to 30,301.64 after the territory’s government promised more coronavirus aid and forecast economic growth of at least 3.5 percent this year.

The Kospi in Seoul added 3.3 percent to 3,056.22 after the Bank of Korea left interest rates unchanged and forecast 3 percent annual economic growth.

Sydney’s S&P-ASX 200 was 0.8 percent higher at 6,834.00 and India’s Sensex opened up 0.9 percent at 51,249.19. New Zealand retreated while Southeast Asian markets advanced.

Overnight, Wall Street’s benchmark S&P 500 index added 1.1 percent to 3,925.43. The Dow climbed 1.4 percent to 31,961.86. The Nasdaq Composite picked up 1 percent to 13,597.97.

Global stock prices have soared over the past six months on hopes for a coronavirus vaccine and central bank promises of abundant credit to support struggling economies. Those sentiments have faltered due to warnings the rally might be too early and that inflation might rise, prompting central banks to pull back.

On Wednesday, Powell affirmed the Fed’s policy commitment in a second day of testimony to legislators in Washington.

The central bank earlier indicated it would let the economy “run hot” to make sure a recovery is well-established following the deepest slump since the 1930s. Powell said it might take more than three years to hit the Fed’s target of 2 percent inflation.

On Thursday, the yield on the 10-year US Treasury note, or the difference between the market price and what a buyer would be paid when the bond matures, widened to 1.40%, the highest in just over a year. That indicated investors were moving money out of bonds, a sign they expect inflation to rise, which would reduce the value of the payout.

Powell told the House Financial Services Committee the Fed was in no hurry to raise interest rates or trim its $120 billion in monthly bond purchases, which pushes down interest rates by making more money available for lending.

In Asia, governments aside from China “should more or less follow the Fed in a patient ‘wait-and-see’ mode in the near future,” Alex Wolf of JP Morgan Private Bank said in a report this week. “This could be a further tailwind to growth this year.”

Investors also are looking for Congress to approve President Joe Biden’s proposed economic aid plan. That includes $1,400 checks to most Americans. However, the plan faces staunch opposition from Republicans and is still subject to negotiations.

In energy markets, benchmark US crude gained 14 cents to $63.36 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.55 on Wednesday to $63.22. Brent crude, used to price international oils, added 21 cents to $66.39 per barrel in London. It advanced $1.67 the previous session to $67.04.

The dollar declined to 105.88 yen from Wednesday’s 105.95 yen. The euro rose to $1.2180 from $1.2148.

https://apnews.com/article/financial-markets-hong-kong-coronavirus-pandemic-asia-financial-markets-e099520810a0d25f5a614007652b9815

Category: FinanceAsia

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