Asian stocks set to track US gains as dollar sinks

US Fed Chair Janet Yellen said in February that market turbulence had “significantly” tightened financial conditions by pushing down stock prices, spurring the dollar to strengthen and boosting some borrowing costs. — Reuters pic
US Fed Chair Janet Yellen said in February that market turbulence had “significantly” tightened financial conditions by pushing down stock prices, spurring the dollar to strengthen and boosting some borrowing costs. — Reuters pic

WELLINGTON, March 17 — The Federal Reserve provided a shot in the arm for riskier assets, with commodities extending gains and Asian stock- index futures signalling a rebound after US officials scaled back their interest-rate strategy amid concern over the global outlook.

The dollar maintained losses that sent it to the weakest level since October against major peers after the Fed pared back the number of rate increases it anticipates enacting in 2016. Mining and energy stocks drove a second day of gains in Australia after futures on equity gauges from Japan to Hong Kong climbed with shares in the US. The greenback’s retreat propelled raw materials higher, with oil building on yesterday’s 5.8 per cent surge and copper futures jumping. Australian bonds also advanced. New Zealand’s dollar climbed after data showed the economy grew more than expected last quarter.

In their much-anticipated post-meeting statement, Fed officials cited the potential impact from weaker global growth and financial-market turmoil on the US economy for keeping the target range for the benchmark federal funds rate between 0.25 per cent and 0.5 per cent. The third major central-bank policy event in a week, the Fed came on the heels of an unprecedented stimulus package unleashed by the European Central Bank, and the Bank of Japan’s decision to maintain its record stimulus. The Bank of England is the next to meet, as investors question the potency of central banks’ monetary easing efforts.

“The Fed’s stance is relatively friendly,” Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo said by phone. “The difference in the stance between the market and the authorities has shrunk, and we’ve managed to get through an important event without drama. Investor sentiment has returned to a neutral zone from a bearish zone that had priced in too much concern.”

The Fed lowered its median projection for US growth in 2016 and next year, and the median of policy makers’ quarterly projections implies two 25 basis-point increases this year, down from four forecast in December. Chair Janet Yellen said in February that market turbulence had “significantly” tightened financial conditions by pushing down stock prices, spurring the dollar to strengthen and boosting some borrowing costs.

“The Fed has clearly been rattled by the nasty selloff seen at the start of 2016,” Angus Nicholson, a market analyst in Melbourne at IG Ltd., said in an e-mail to clients. “This was far more dovish than markets had expected. Asia is looking to open strongly in the wake of the Fed decision.”

Stocks

Australia’s S&P/ASX 200 Index gained 0.6 per cent as of 8:54am, with commodity shares rising at least 2 per cent, while New Zealand’s S&P/NZX 50 Index was down 0.1 per cent after snapping a 12-day rally yesterday.

Standard & Poor’s 500 Index futures added 0.1 per cent following the US benchmark’s 0.6 per cent advance, while contracts on Hong Kong’s Hang Seng and Hang Seng China Enterprises indexes were up 0.2 per cent in most recent trading. Kospi index futures in Seoul rose 0.5 per cent.

In Japan, Nikkei 225 Stock Average futures were bid up 0.2 per cent to 16,850 in the Osaka pre-market. Yen-denominated contracts on the gauge gained 0.5 per cent to 16,920 in Chicago, with the yen paring back some of the past two day’s gains. The currency lost 0.2 per cent early today, to 112.77 per dollar.

Australia is due to issue monthly jobs data today, while the Philippines updates its budget balance. Both Hong Kong and Indonesia are set to review key interest rates.

Currencies

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed after sliding 1.1 per cent Wednesday to its lowest close since Oct. 20.

“The mantra we follow as investors is don’t fight the Fed, but it feels like what the Fed is saying now is don’t fight the market” on the rate path, said Matthew Whitbread, a Boston-based investment manager at Baring Asset Management.

The euro was steady at US$1.1218 after gaining 1 per cent last session, while the pound traded at US$1.4252 following its first increase this week. The Bank of England is projected to hold rates Thursday and maintain current stimulus levels.

The kiwi added another 0.2 per cent after strengthening 1.9 per cent yesterday. GDP grew 0.9 per cent last quarter, matching the pace of the previous three months and exceeding the 0.7 per cent growth forecast by economists.

Commodities

West Texas Intermediate crude climbed 1 per cent to US$38.85 a barrel following its steepest one-day advance since Feb. 22.

Oil exporting countries plan to meet April 17 in Doha to discuss a commitment to freezing output, Qatar’s energy minister said. US crude supplies also advanced 1.32 million barrels last week, according to government data out yesterday, less than half the 3.2 million barrel-increase projected by analysts polled by Bloomberg.

Copper futures due in May rose 0.9 per cent to US$2.2545 a pound in New York, while gold dropped 0.3 per cent, resuming losses after a 2.5 per cent bounce yesterday. — Bloomberg

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