TOKYO, Jan 31 — Asia stocks rose to a four-month high today, tracking Wall Street, after the Federal Reserve pledged to be patient with further interest rate hikes, signalling a potential end to its tightening cycle amid signs of slowing global growth.
The dollar struggled near a three-week trough against its major peers and US Treasury yields were significantly lower as investors reacted to the Fed’s change in tone.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose to its highest since October 4 and was last up 0.4 per cent.
Japan’s Nikkei rose 1.4 per cent. Australian stocks added 0.4 per cent, while South Korea’s KOSPI advanced 0.7 per cent.
The Fed yesterday held interest rates steady as expected, and also discarded its promises of “further gradual increases” in interest rates.
The central bank said it would be “patient” before making any further moves amid a suddenly cloudy outlook for the US economy due to global growth risks and impasses over trade and government budget negotiations.
On Wall Street, the Dow and the Nasdaq rallied 1.7 per cent and 2.2 per cent, respectively, on hopes the Fed’s pause would give the US economy and corporate profits more room to run.
“The Fed’s statements firmly confirmed its dovish stance, which had already been on display at the start of the year. Market concerns towards the Fed’s rate hikes have now been put to rest,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.
“The mention of the balance sheet by the Fed was a positive surprise. The focus now shifts immediately to US-China trade talks, but the equity markets could have enough cushioning to withstand negative news from the talks.”
The US central bank also said yesterday that its balance sheet would remain larger than previously expected.
The United States and China opened a pivotal round of high-level two-day talks yesterday aimed at bridging deep differences over China’s intellectual property and technology transfer practices and easing a months-long tariff war.
If the two sides cannot reach a deal soon, Washington has threatened to more than double tariffs on Chinese goods on March 2.
In currencies, the dollar index against a basket of six major currencies struggled near a three-week low of 95.253 brushed yesterday, when it had sunk 0.5 per cent.
A weaker dollar helped nudge the euro to US$1.1501 (RM4.70) yesterday, its highest since January 11, and the common currency was last up 0.1 per cent at US$1.1488.
The greenback was down 0.1 per cent at 108.96 yen and close to a two-week low of 108.81 reached overnight.
The pound was a shade higher at US$1.3123, given some reprieve after slipping earlier in the week when British lawmakers voted down a proposal in parliament that could have prevented a potentially chaotic “no-deal” Brexit.
The benchmark 10-year US Treasury yield stood at 2.681 per cent after sliding to 2.676 per cent overnight, its lowest since January 14.
Oil prices rose after US government data showed signs of tightening supply and as investors remained concerned about supply disruptions following US sanctions on Venezuela’s oil industry.
US crude oil futures were up 0.46 per cent at 54.48 per barrel. — Reuters
Source: The Malay Mail Online