Asia’s markets jumped on the Wall Street bandwagon on Thursday tailing another record day in New York after the Federal Reserve finally confirmed it would start tapering its pandemic support programme this month – but added interest rate rises were a bit further off.
The announcement brought to an end to months of speculation about the bank’s plan for the bond-buying programme, and removed some unease from trading floors where there was concern that officials were leaving it too late to respond to rocketing inflation.
The Fed is the latest bank to move away from its emergency measures and it comes after rate hikes in several countries including Canada and South Korea, while the Bank of England is expected to follow suit later in the day.
It also makes the Fed the latest monetary authority to begin winding back the measures put in place at the start of the pandemic which have been crucial to the global rebound and an 18-month equity rally.
Policymakers had said at the outset that they would only start tapering when they were satisfied the world’s number one economy was well on the recovery track with unemployment under control and inflation running hot for an extended period.
Inflation has been surging for months, while jobs creation continues to scorch along, albeit with the rare blip – reinforced by data on Wednesday showing private businesses hired far more people than expected in October.
However, while central bank boss Jerome Powell was pleased with the economic recovery, he said he wanted to see the labour market heal more before hiking interest rates from record lows, telling reporters: “We think we can be patient.”
The announcement helped Wall Street’s main indexes reverse early losses to surge to new record highs for a fourth straight day.
And the upbeat mood filtered through to Asia, with Tokyo up almost 1% as it reopened after a one-day break, while Hong Kong, Shanghai, Sydney, Seoul, Bangkok, Manila and Jakarta also rallied.
Tapering And Tightening
The benchmark Nikkei 225 index ended up 0.93% or 273.47 points at 29,794.37, while the broader Topix index finished up 1.18% or 23.89 points at 2,055.56.
The Hang Seng Index added 0.80%, or 200.44 points, to 25,225.19. The Shanghai Composite Index gained 0.81% , or 28.33 points, to 3,526.87, while the Shenzhen Composite Index on China’s second exchange rallied 1.32%, or 31.56 points, to 2,425.16.
Paris opened with more gains after clocking up a second straight all-time high, while London and Frankfurt also rose.
“With the tapering debate out of the way, the focus shifts to the rates outlook,” JP Morgan Asset Management global market strategist Kerry Craig said. “Our view has always been tapering then tightening and that is what we heard from the Fed, with Chair Powell careful to separate the two policy tools.”
Oil prices edged up after Wednesday’s sharp losses that followed news that US inventories had risen for the fifth time in six weeks, while the progress of Iran nuclear talks raised the possibility of more crude being allowed back into the market if sanctions on the country are lifted.
A meeting of OPEC and other major producers later in the day is the next point of attention, with discussion to focus on whether it will lift its output quota.
Tokyo > Nikkei 225: UP 0.9% at 29,794.37 (close)
Hong Kong > Hang Seng Index: UP 0.8% at 25,225.19 (close)
Shanghai > Composite: UP 0.8% at 3,526.87 (close)
New York > Dow: UP 0.3% at 36,157.58 (close)
- AFP with additional editing by Sean O’Meara