TOKYO, June 5 — Asian shares tracked the Wall Street rally today after US central bank comments pointed to the increasing prospects of an interest rate cut, boosting investor sentiment and pushing the dollar lower.
The rebound in stock prices also prompted US bond yields to step up from their recent lows, with the 10-year yield off its 21-month low hit earlier in the week.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.4 per cent, while Japan's Nikkei average climbed 1.9 per cent.
Supporting the market cheer, Federal Reserve Chairman Powell yesterday dropped his standard reference to the central bank being "patient" in its approach to any rate decision, instead saying the Fed would respond "as appropriate" to the risks posed by a global trade war and other recent developments.
The comments were interpreted by investors as a clear nod to a policy easing.
“Powell gave the markets a reason to rally but I think it's a short-covering bounce, rather than a trend reversal. It's just the markets have priced in much of the news to come,” said Yasuo Sakuma, chief investment officer at Libra Investments.
On Wall Street, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite clocked their biggest one-day gains in five months.
Uncertainties over how, or if, the United States will settle its trade conflict with its key trade partners, notably China, has kept many investors on edge.
US Treasury Secretary Steven Mnuchin meets with People's Bank of China Governor Yi Gang at the G20 finance leaders meeting this weekend in Japan, a Treasury spokesman said on Tuesday.
Chinese President Xi Jinping said the country's economy is stable, healthy and well placed to meet all risks and challenges, according to a transcript published by the Xinhua news agency.
In the foreign exchange market, major currencies were on the sidelines for now.
The greenback hit a seven week-low of 96.995 against a basket of six major currencies overnight. The index was last quoted at 97.096, little changed on the day. The euro fetched US$1.1258, almost steady on the day.
The pound recovered yesterday, after suffering its 4th consecutive week of losses against the euro, but concerns about a disorderly departure from the European Union meant gains were minimal, amid promises from US President Donald Trump of a “phenomenal” post-Brexit trade deal. Sterling was last quoted at US$1.2701.
Other major currencies were relatively calm, with the safe-haven yen still supported but not aggressively so. The US dollar was holding at 108.13 yen, flat on the day.
In commodity markets, oil prices ended as much as 1 per cent higher yesterday after a global stock market rally pulled Brent crude from a four-month low touched earlier in the session.
In early Asian trade, US crude retreated 0.3 per cent to US$53.33 (RM222.85) a barrel and Brent crude futures stood almost flat at US$61.95 per barrel. — Reuters
