Asian shares bounce after Powell dispelled Reuters charge hike fears

© Reuters. Men holding umbrellas walk near an electrical board showing Nikkei index at a realtor in Tokyo

By Hideyuki Sano and Echo Wang

TOKYO / MIAMI (Reuters) – Asian stocks rose Thursday after Federal Reserve Chairman Jerome Powell re-affirmed that interest rates would remain low for a long time, allaying market fears that higher inflation could hit the market Could cause the central bank to tighten the cash flow.

Powell’s calm rejuvenated the reflation businesses and raised risk-weighted asset prices while US bond yields rose to a year high.

MSCI’s ex-Japan Asia-Pacific stock index rose 1.0% and gained 1.6%.

Hong Kong rose 1.8% to offset more than half of the previous day’s losses after announcing a stamp tax hike.

On a second day in Washington, Powell reiterated the Fed’s promise to bring the US economy back to full employment and not worry about inflation unless prices rose persistently and worryingly.

“Powell said it will take three years for them to hit their inflation target and essentially reiterates that the Fed will not raise interest rates until 2023,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ (NYSE 🙂 Morgan Stanley (NYSE 🙂 securities.

“A large number of investors who have to work are pouring into the stock market, and that more than offsets negative aspects of higher bond yields.”

The prospect of a longer period of low interest rates came as investors anticipate huge fiscal stimulus in the US and advances in COVID-19 vaccinations to support the economy, particularly in the sectors hardest hit by the pandemic.

The U.S. Food and Drug Administration announced on Wednesday that Johnson & Johnson’s (NYSE 🙂 one-of-a-kind COVID-19 vaccine appeared safe and effective in studies and paved the way for emergency approval earlier this week.

Johnson & Johnson rose 1.3% after the news.

On Wall Street, the Dow Jones averaged 1.35% to a record high, outpacing the 1.0% gain in tech-heavy Nasdaq as investors switched from flying tech companies to cyclical stocks.

GameStop (NYSE 🙂 rose 83.3% in expanded trading, building to 103.9% on Wednesday.

US bond prices remained under pressure, raising yields to their highest level in a year.

The US 10-year Treasury yield rose to 1.412% after hitting a high of 1.435% on Wednesday.

“I wouldn’t say there is panic in the bond market. But we have a coronavirus package worth $ 1.5, 1.7, or 1.9 trillion. There will also be infrastructure spending. Investors see few Reasons to aggressively buy bonds now, “said Takafumi Yamawaki, director of Japanese rate research at JPMorgan.

A closely watched portion of the US yield curve, which measures the gap between yields by two, rose to 127.4 basis points, nearing a high of 135.7 after Donald Trump’s surprise election victory in 2016.

In the forex market, the US dollar fell as a safe haven near three-year lows versus riskier currencies as continued dovish signals from the Fed fueled reflation bets.

The Australian dollar hit a three-year high of $ 0.7978 while the safe-have yen fell 0.2% to $ 106.04 per dollar. The euro remained little changed at USD 1.2159.

Elsewhere, the price rose 3% to its highest level in nearly a decade.

Crude oil soared to a fresh 13-month high after US government data showed a decline in crude oil production as a freeze disrupted production last week.

rose 0.25% to $ 63.40 a barrel and was at $ 67.33, up 0.43% on the day.

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