Asian Markets Rally as U.S Fed Indicate no Interest Rate Hike
Asia-Pacific markets broadly advanced Thursday as investors cheered after the U.S. Federal Reserve’s policymaking committee overnight voted to keep short-term borrowing rates near zero in a widely expected move.
The Nikkei 225 in Japan rose 1.01% to 30,216.75, while the Topix index added 1.23% to 2,008.51. South Korea’s Kospi climbed 0.61% to 3,066.01, and the Kosdaq rose 0.64% to 949.83.
In Hong Kong, the Hang Seng index rose 1.21% to 29,384.84, while Singapore’s Straits Times index gained 0.74% in late-afternoon trade.
Chinese mainland shares also advanced: The Shanghai composite rose 0.51% to 3,463.07 while the Shenzhen component added 1.12% to 13,963.92.
Australian shares bucked the generally positive trend, with the benchmark ASX 200 slipping 0.73% to 6,745.90 as most sectors declined. The energy and materials subindexes earlier recovered from losses in the previous session but could not hold on to most of the gains, closing up by 0.04% and 0.1%, respectively.
U.S. stocks rose overnight, pushing the Dow Jones Industrial Average to its first close above 33,000 while Treasury yields eased from earlier highs.
U.S Fed Meeting
The Fed ramped up its expectations for economic growth but indicated that there are likely to be no interest rate hikes through 2023.
Chairman Jerome Powell said he expects inflation to rise this year due in part to soft year-over-year comparisons from the early days of the Covid-19 pandemic in 2020. However, he said that wouldn’t be enough to change policy that seeks inflation above 2% for a period of time if it helps achieve full and inclusive employment.
According to the dot plot of individual members forecasts, four of the 18 Federal Open Market Committee members looked for a rate hike in 2022 compared with just one at the December meeting. For 2023, seven members see a hike, compared with five in December.
“The FOMC statement was very similar to January’s,” strategists at the Commonwealth Bank of Australia wrote in a Thursday morning note.
However, the Committee noted that indicators of activity and employment had turned higher recently. Nevertheless, the statement retained that the ongoing health crisis continues to pose considerable risks to the economic outlook and that current policy accommodation levels remain appropriate.
Asian Markets Currencies and oil
The dollar tumbled against its peers in the currency market as the dollar index fell from levels near 91.900 before the Fed decision. During Asian trading hours on Thursday, the index rose 0.22% to 91.642.
The Japanese yen changed hands at 109.20 per dollar, weakening from an earlier level around 108.62, while the Australian dollar rose 0.12% to $0.7803.
Oil prices declined on Thursday during Asian trading hours. U.S. crude futures were down 0.91% at $64.01 a barrel, while global benchmark Brent fell 0.96% to $67.35.
Energy prices fell overnight on the back of growing worries around fuel demand as well as rising U.S. inventory. Additionally, there are concerns in Europe that economic recovery could be delayed after several countries temporarily halted the use of AstraZeneca’s Covid-19 vaccines due to worries over possible side effects.