Investors react to the Fed’s decision

A forex trader monitors exchange rates in a trading room at KEB Hana Bank in Seoul on March 13, 2020.

JUNG YEON-JE | AFP via Getty Images

SINGAPORE – Asia-Pacific markets advanced broadly on Thursday as investors reacted after the US Federal Reserve’s policy-making committee voted to keep short-term loan rates near zero at a widely expected move.

The Nikkei 225 in Japan rose 1.58% while the Topix index added 1.15%. South Korea’s Kospi was up 1.23% and the Kosdaq was up 0.87%.

In Hong Kong, the Hang Seng Index rose 1.15%, while Singapore’s Straits Times Index gained 0.97%.

Mainland Chinese stocks advanced: the Shanghai composite rose 0.45% while the Shenzhen component rose 0.68%.

Australian stocks bucked the generally positive trend, with the benchmark ASX 200 falling 0.43% as most sectors traded lower. However, the energy and materials sub-indices recovered from the losses of the previous session to trade up 0.37% and 0.24%, respectively.

US stocks rose overnight, propelling the Dow Jones Industrial Average to its first close above 33,000, while Treasury yields declined from previous highs.

Fed decision

The Fed raised its expectations for economic growth, but indicated that interest rate hikes are not likely until 2023.

President Jerome Powell said he expects inflation to rise this year due in part to soft year-on-year comparisons from the early days of the Covid-19 pandemic in 2020. However, he said that will not be enough to change the policy he seeks. inflation higher than 2% over a period of time, if it helps to achieve full and inclusive employment.

Four of the 18 members of the Federal Open Market Committee expected a rate hike in 2022, compared with just one at the December meeting, according to the “dot plot” of individual members’ forecasts. By 2023, seven members see an increase, compared to five in December.

Each quarter, FOMC members forecast where short, medium, and long-term interest rates will go. These projections are represented visually in graphs and are called a dot plot.

“The FOMC statement was very similar to that of January,” strategists from the Commonwealth Bank of Australia wrote in a note Thursday morning. “However, the Committee noted that activity and employment indicators had risen recently. However, the statement retained that the current health crisis continues to pose” considerable risks to the economic outlook “and that current levels of policy accommodation continue. being appropriate. “

“Combination of unchanged midpoint plots and dovish comments from President Powell pushed US and US bond yields lower (after a spike in yields earlier in the day),” CBA strategists noted. .

Coins and oil

In the currency market, the dollar fell against a basket of its peers as the dollar index fell from levels near 91,900 before the Fed’s decision to around 91,498 on Thursday during Asian business hours.

The Japanese yen changed hands at 109.06 to the dollar, weakening from a previous level around 108.69, while the Australian dollar rose 0.42% to $ 0.7827.

Oil prices fell on Thursday during Asian business hours. US crude futures fell 0.54% to $ 64.25 a barrel, while the global benchmark Brent fell 0.54% to $ 67.63.

Energy prices fell overnight due to growing concerns over fuel demand, as well as rising US inventories. In Europe, there are concerns that the economic recovery may be delayed after several countries temporarily halted the use of AstraZeneca’s Covid-19 vaccines due to concerns about potential side effects.

CNBC’s Jeff Cox contributed to this report.


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